trending or momentum?

[MrAgi1]

There are different explanations of momentum online, some vague and sometimes contradictory.

However, I found two that explained the concept relating it to physics. I found both interesting but I am not sure which one correct.

 

[MrAgi1]

First concept:
Momentum is like velocity and trend is like speed. So if a stock start at $100 goes to 110$ and ends at $100, trend is present but momentum is zero.

Second Concept:
Momentum measures the slope of a trend.

A stock that is increasing by 2$ everyday has a constant momentum(fixed increase in stock price result in a constant slope).

A stock price that increase by 2$ first day, 9$ on second day, 25$ on third day e.t.c has increasing value of momentum?

I posted a question here yesterday about the rsi vs adx:
https://www.elitetrader.com/et/threads/adx-vs-rsi.358968/page-2#post-5392387

However, What I really want to understand is the difference between high momentum stock and a trending stock.

However, there are different explanations of momentum online, got really confused.

One explanation I found interesting online was one that explained the concept relating it to physics.

It said momentum is like velocity and trend is like speed. So if a stock start at $100 goes to 110$ and back to $100, trend is present but momentum is zero.

 

[comagnum]

The way I see it trend is the directional path while momentum is the velocity of price change over time. In a trend there can be periods of high momentum.

 

[longandshort]

MomentumStrategiesJF96.pdf (upenn.edu)

 

[murray t turtle]

The way I see it trend is the directional path while momentum is the velocity of price change over time. In a trend there can be periods of high momentum.

View attachment 259633

%%
Exactly;
momentum = price speedometer+ tends to get out waaaaaay to early.

 

[MrAgi1]

The way I see it trend is the directional path while momentum is the velocity of price change over time. In a trend there can be periods of high momentum.

View attachment 259633

I like your explanation.
That means the second concept is correct. Right?

First concept:
Momentum is like velocity and trend is like speed. So if a stock start at $100 goes to 110$ and ends at $100, trend is present but momentum is zero.

Second Concept:
Momentum measures the slope of a trend.

A stock that is increasing by 2$ everyday has a constant momentum(fixed increase in stock price result in a constant slope).

A stock price that increase by 2$ first day, 9$ on second day, 25$ on third day e.t.c has increasing value of momentum?

 

[SunTrader]

Rate of change.

 

[MrAgi1]

%%
Exactly;
momentum = price speedometer+ tends to get out waaaaaay to early.

Exactly. So if the slope of the stock price is experiencing a high increase. Then there is high momentum.

 

[Saltynuts]

Bunch of semantics all up in this thread!!!

 

[ph1l]

A stock that is increasing by 2$ everyday has a constant momentum(fixed increase in stock price result in a constant slope).

A fixed increase means the slope is decreasing. For example,

perl -e 'use warnings; use strict; my $curPrice = 100; my $incr = 2;
for (my $i = 1; $i <= 10; ++$i)
{
    my $slope = $incr / $curPrice;
    my $nextPrice = $curPrice + $incr;
    print "i $i curPrice $curPrice incr $incr slope $slope nextPrice $nextPrice\n";
    $curPrice = $nextPrice;
}'

Result:
i 1 curPrice 100 incr 2 slope 0.02 nextPrice 102
i 2 curPrice 102 incr 2 slope 0.0196078431372549 nextPrice 104
i 3 curPrice 104 incr 2 slope 0.0192307692307692 nextPrice 106
i 4 curPrice 106 incr 2 slope 0.0188679245283019 nextPrice 108
i 5 curPrice 108 incr 2 slope 0.0185185185185185 nextPrice 110
i 6 curPrice 110 incr 2 slope 0.0181818181818182 nextPrice 112
i 7 curPrice 112 incr 2 slope 0.0178571428571429 nextPrice 114
i 8 curPrice 114 incr 2 slope 0.0175438596491228 nextPrice 116
i 9 curPrice 116 incr 2 slope 0.0172413793103448 nextPrice 118
i 10 curPrice 118 incr 2 slope 0.0169491525423729 nextPrice 120