momentum

Definition

The perceived strength behind a price movement. Momentum investors seek to take advantage of upward or downward trends in stock prices or earnings. They believe that these stocks will continue to head in the same direction because of the momentum that is already behind them. The idea relies on the belief that there are a large number of investors in the market who will buy whatever stock is already hot. Momentum investors do not necessarily believe that momentum stocks will do well in the long run, but they do think that in the short run people will continue to buy them as they have in the immediate past. This therefore involves market timing which is very risky.

Use momentum in a sentence

They did not have enough momentum to get to the next stage of the contest and I knew they would lose.

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This stock is on a downward spiral, a momentum that can't last, so it will probably be a good investment for our company.

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With the stock market, gains are often attributed to those who can anticipate a change in momentum of a stock and profit by reacting before the momentum starts.

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