What is Momentum?

Momentum is the believed strength behind the stock’s price movement. On the market there are momentum investors who intentionally take advantage of the share’s up going or down going trends. The theory behind this is quite simple these investors believe that the certain stock will keep following it’s trend because it already has momentum. And also on the market there are many people who purchase shares which are hot. Of course momentum investors don’t believe that the certain stock will continue behaving the current way in the long run, but they believe that people who are buying for short periods of time they will keep it up because they have been doing it on previous occasions. This type of investing involves market timing which might prove risky. The momentum strategy is based on short term price movements where the company’s status doesn’t have much effect.