What is Momentum?
The tendency of a stock's recent price trend to continue.
Formal Definition
Momentum investing buys stocks that have risen recently and sells those that have fallen, on the empirical premise that price trends persist over horizons of roughly 3 to 12 months. It is a distinct factor from value and quality and underpins many trend-following and quantitative strategies.
In Simple Terms
It is the idea that stocks going up tend to keep going up for a while, and stocks going down keep falling. Momentum investors ride the trend rather than betting against it.
Example
A stock up 25% over the past six months while the market is flat exhibits strong positive momentum.