Momentum
Momentum is how fast and how strongly a price has been moving in one direction recently. It describes what has already happened, not what will happen next. RSI, the Relative Strength Index, is one common way to put a number on it.
What momentum describes
A stock has climbed for days and something in you wants to believe it will keep climbing, or that it must now fall because it went up too much. Momentum puts a name on that recent push. It measures how much the recent up-moves have outweighed the recent down-moves. It does not say whether the price will rise or fall next.
How RSI measures it
Take a run of daily price changes and sort them into two piles: up days count as gains and down days as losses. A day that moved the wrong way counts as zero in that pile. Average each pile, then divide the average gain by the average loss to get RS, the Relative Strength. RS is squeezed onto a 0 to 100 scale with RSI = 100 minus 100 divided by (1 plus RS).
How to read the number
A high RSI means gains have recently been much stronger than losses, and a low RSI means the reverse. Many charts draw reference lines at 70 and 30. Both numbers are built only from days that have already happened, so they describe the past, not the future.
Its limits
A strong momentum reading does not mean the price must keep rising, and a weak one does not mean it must bounce. Use it as one clue beside others, and never as a signal to trade on its own. Maetis does not give trading advice.
A week of prices (hypothetical numbers)
You track a stock across five sessions, three up and two down. The average gain comes to ₹1.20 a day and the average loss to ₹0.60 a day. RS works out to 2.0, and RSI to 100 minus 100 divided by 3, which is 66.67. Gains have run about twice as strong as losses this week. That says what happened, not what comes next.
Common questions
- What is momentum in simple words?
- How fast and how strongly a price has been moving in one direction recently.
- What is RSI?
- A 0 to 100 number that compares how strong recent price gains have been against recent losses.
- Does high momentum mean the price will keep rising?
- No. Momentum describes recent moves and does not predict the next one.
- What do the 70 and 30 lines on an RSI chart mean?
- They are common reference lines: readings near 70 mean gains have been strong lately, and near 30 mean losses have been. They are not signals on their own.