What is Market Momentum?
Let's find out Market Momentum meaning, definition in crypto, what is Market Momentum, and all other detailed facts.
In its most basic sense, market momentum develops market trends. Besides that, it reflects the ongoing sentiment of the market. This is because market momentum is determined by changes in an asset’s market price.
Market momentum can be employed in technical analysis (TA). It can assist traders in finding various trading options. These options might present themselves when market momentum is increasing during bullish or bearish trends. However, they can also occur when market momentum is getting weaker during reversal points.
Keep in mind that market momentum is linked to both – price fluctuations and trading volume. Thus, high trading volume might suggest a stronger market trend. As a result, this would imply that market momentum is also stronger and more consistent.
Market momentum is calculated using such formula:
Market momentum = (current price) - (closing price of the past n days)
Many investors employ technical analysis indicators to assess market momentum. They do that to identify potential market trends. Some examples of these indicators include:
However, specific indexes have also been developed to evaluate market momentum in certain market spehres. One example of such a momentum index would be the Russell 1000 Momentum Focused Factor Index.