What it is
Momentum refers to the rate of acceleration of a security's price or volume. In investing, it's the tendency for stocks or other assets that have been rising to continue rising, and for those that have been falling to continue falling. Momentum investors aim to profit by identifying and buying assets that are on an upward trend and selling those on a downward trend, often using technical analysis to spot these patterns.
Momentum is a widely discussed factor in financial markets, influencing everything from individual stock performance to broader sector rotation. For example, during a bull market, growth stocks or the Magnificent Seven might exhibit strong momentum, attracting more buyers and pushing prices higher. Conversely, a stock losing momentum might signal a coming reversal. Retail investors often follow momentum indicators to time their trades and identify trending assets.
Why it matters
Understanding momentum can help you identify trending stocks or sectors, potentially leading to profitable short-term trades. It's a key factor in many active trading strategies.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice