Reading Markets · Reading Price Action
Momentum: Reading the Speed Behind a Move
What You'll Learn
- What momentum refers to, distinct from direction alone
- How momentum can be read informally directly off price action
- Why slowing momentum is often watched closely, even without a reversal yet
The Big Idea
This is the final lesson of Reading Markets, and I want to leave you with one more essential idea: momentum. It describes the speed and strength behind a price move, not just its direction. Two moves can be headed the same way while having very different momentum behind them, and that difference is often treated as meaningful information on its own.
Let's Break It Down
Direction alone only tells you whether price is going up or down. Momentum adds a second dimension: how forcefully it is doing so. A trend can be genuinely strong, with large, decisive candles covering a lot of price distance quickly, or genuinely weak, with small, hesitant candles that cover much less distance over the same period.
You can read momentum informally, directly from price action itself. Noticeably larger candles, and price covering more distance in less time, generally suggest stronger momentum. Progressively smaller candles covering less distance can suggest weakening momentum, even while the overall direction has not changed yet.
A commonly watched pattern is a trend that is still technically continuing in the same direction structurally, but with visibly slowing momentum — smaller moves, more hesitation. This is often treated as an early signal worth paying attention to, even though slowing momentum on its own does not guarantee an actual reversal is coming.
Real Example
Picture a car still moving forward but visibly decelerating well before it comes to a stop. Its direction has not changed yet, but its momentum clearly has. Watching that deceleration gives you useful information about what might happen next, even before the car actually stops or reverses.
Why It Matters
I want you to leave this course seeing the full picture: trend, structure, support and resistance, and momentum together give a much fuller picture of a market's current state than any single one of these concepts on its own. This sets up the deeper indicator-based tools I will teach you next, in Technical Analysis.
Common Mistake
Please do not focus only on direction while ignoring momentum entirely. A trend that is technically still continuing but has clearly lost momentum is a meaningfully different situation than the same trend continuing with strong, forceful moves — even though direction alone looks the same in both cases.
Quick Check
What does momentum specifically describe, beyond direction?
Key Takeaways
- Momentum describes the speed and strength behind a price move, separate from direction alone.
- Larger, more decisive candles generally suggest stronger momentum; smaller, hesitant ones suggest it's weakening.
- Slowing momentum within a still-continuing trend is often watched closely, even though it doesn't guarantee a reversal.
Finished reading?
Mark this lesson as complete to track your progress.