DEFINITION of ‘Momentum Investing’
An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
BREAKING DOWN ‘Momentum Investing’
This strategy looks to capture gains by riding “hot” stocks and selling “cold” ones. To participate in momentum investing, a trader will take a long position in an asset, which has shown an upward trending price, or short sell a security that has been in a downtrend. The basic idea is that once a trend is established, it is more likely to continue in that direction than to move against the trend.