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Finance GlossaryMomentum Investing
Momentum Investing
Definition of Momentum Investing
Momentum Investing is an investment approach that focuses on buying securities that have shown strong recent price performance and selling those with weak performance. The strategy is based on the idea that assets trending in one direction often continue moving that way for some time due to market behavior and investor psychology.
Related Terms
Narrow Market
A narrow market describes a situation where only a few stocks or sectors influence market movement, while the majority of stocks have low trading volume. It has few active participants on either the buy or sell side of the market. This limited participation suggests that the market trend is not broadly supported across the entire market.
Warrant
A warrant is a financial instrument that gives the holder the right, but not the obligation, to buy a company’s shares at a predetermined price before a specific expiry date. For example, investors may receive warrants during fundraising rounds, benefiting if the company’s share price rises above the exercise price.
Bombay Stock Exchange
Established in 1875, Bombay Stock Exchange or simply BSE is a place where stockbrokers and traders can buy and sell securities like stocks, bonds, ETFs, and more. 5000+ securities are listed on BSE, which is the oldest stock exchange in India and Asia.
Commodity Exchange
A commodity exchange is a marketplace where commodities and related derivative contracts are standardized and traded. The commodity exchange can be split into these sub-markets:
- Derivatives market: this is where commodity exchanges allow futures, options, forwards, and other derivatives to be traded
-
Spot market: this is where commodity exchanges allow buying and selling of commodities in real-time (on the spot), including cash contracts
In India, there are 4 commodity exchanges that are popular and widely turned to:
- Indian Commodity Exchange (ICEX)
- Multi Commodity Exchange of India (MCX)
- National Commodity & Derivatives Exchange Limited (NCDEX)
-
National Multi Commodity Exchange of India (NMCX)
Within these exchanges, the most commonly traded commodities include:
- Crude oil
- Coffee
- Corn
- Cotton
- Gold
- Natural gas
- Silver
- Sugar
- Wheat
Ichimoku Cloud
Ichimoku Cloud is a group of technical indicators that’s used to understand trends, momentum, support,
and resistance by calculating averages.
Furthermore, the Ichimoku Cloud indicator is made up of two components:
- TenkanSen: The short-term indicator
-
KijunSen: The long-term indicator
There’s a cloud that’s formed as a result of plotting the averages and using the components on a chart.
One glance at this cloud can tell you multiple things like:
- Uptrend: If the price is above the cloud
- Downtrend: If the price is below the cloud
- Neutral: If the price is in the cloud
Moreover, if the cloud and the price are moving in the same direction, there’s much more confidence in the
trend that’s forming. In fact, it’s a trading signal.
Prospectus
A prospectus is a legal document that gives detailed disclosure about a company's financial condition, its operations, management, and the terms of a new securities offering (such as an IPO). It is mandated by regulatory bodies and must be provided to potential investors to provide them with all the information they need to make an informed investment decision. The two key parts are the preliminary prospectus (red herring prospectus) and the final prospectus.
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