Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Momentum

Momentum is a derivative of price action. The same concepts we use in physics to measure the relationships between an object, its velocity, and its acceleration are the ones we use to describe how prices in the markets change. In physics, velocity is how the position of an object changes over time. Acceleration measures how velocity changes over time. In the markets, trend is the equivalent of velocity and momentum is the equivalent of acceleration.

If momentum gets to be too positive or too negative, then price acceleration and price trends become unsustainable and that means opportunities to close out positions or even reverse them go the other way. Alternately, if momentum starts to wane as price action continues, we have another ...