What Is Momentum Trading

A year of speed

Momentum is speed: how far the price has moved over a set number of days. Here is a year of it, from real closes: gold in 2025, each day a bar for how far the close was from the close twenty trading days earlier, in per cent. Green bars above the line are a price higher than it was twenty days before, and the taller the bar, the faster the move. The fastest day of the year was 16 October, up 18.7 per cent in twenty days; 22 April was up 12.3. Momentum trading is the family of strategies that go with what is moving fastest, while it is still moving.

A boulder on a slope

Picture a boulder on a slope. A boulder that has been rolling is the one most likely to be rolling a moment later; that is all momentum means, in physics and on a chart. A momentum strategy rides the rolling: it picks what is already moving fast and stays with it while it moves. Every boulder stops. The strategy's cost is that the stop is only known when the rolling has stopped, a step after the fact, which is the price paid by every method that reads the past.

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