Glossary / Trend & momentum

Momentum

Momentum describes the speed and persistence of a security's recent price movement. As a measurement it is a short-horizon rate of change; as a factor it is the observation that recent price behaviour tends to carry some information about near-term price behaviour.

How it is measured

How is momentum measured?

Compute the return over a recent window — days to a few months — and compare it across a universe of securities, or place it on a fixed scale. Implementations differ mainly in window length and in whether the raw return is adjusted for how choppy the path was.

Why it matters

Why does momentum matter to a swing trader?

Momentum answers a different question from trend: trend describes where price has travelled over months, momentum describes how quickly it is travelling now. Swing traders track it because a multi-week holding period sits in exactly the window momentum measures. It is also the noisiest common factor — short-horizon readings reverse frequently, and a reading built on a few weeks of data is heavily exposed to single events like an earnings gap or an index-inclusion flow.

In Tapeline

Does Tapeline use momentum?

Momentum is one of the six named factors in the Tapeline composite, and deliberately the least-weighted of them. The methodology page states why, including the fact that its short-horizon component is an approximation rather than a direct measurement.

Read what the Momentumfactor measures →

Tapeline publishes the six factor names and the ordering of their weights. The numeric weights, the scoring equation and the band edges are not published.

Related

See this in the product

What the Momentum factor measures · The Momentum factor · Full methodology

Related terms

Rate of change
Rate of change is the percentage difference between the current price and the price a fixed number of sessions ago.
Trend
A trend describes the direction price has generally travelled over an extended window, and how consistently it has travelled that way.
Relative strength
Relative strength is a difference, not a standalone reading: a security's price change over a period, minus a benchmark's price change over exactly the same period.
Breakout
A breakout describes price moving beyond a level that had previously contained it — a prior high, a prior low, or the boundary of a range price had been oscillating inside.

Back to the full glossary.

General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.