Momentum
The tendency of assets that have performed well (or poorly) recently to keep doing so for a time, a well-documented pattern used by trend and momentum strategies.
Momentum is the empirical tendency for recent relative performance to persist: winners tend to keep winning and losers to keep losing, on average, over intermediate horizons. It is one of the most studied patterns in markets.
Momentum is not a certainty: it holds on average and breaks at sharp reversals, arriving late when a trend turns. Rules that read momentum pair it with other dimensions, such as trend and coherence, precisely because no single signal is reliable on its own.
Related terms
- Market regimeA persistent market environment (trending, calm, or turbulent) that a rules-based reading identifies from price behaviour, rather than a prediction of what comes next.
- DrawdownThe decline from an investment's most recent peak to its subsequent trough, in percent. It is a direct measure of pain endured, and of the gain needed to recover.