The term “Momentum” in the world of FOREX describes the rate of acceleration of a security's price or volume. Something to keep in mind is that price frequently lies, while momentum speaks the truth. Just as professional poker players play the game rather than the cards, experienced traders trade on momentum.

In FOREX a momentum trend is precious for successful trading and profit increase. There are many tools and charts freely available to anyone, used as trend-following momentum indicators (i.e. Moving Average Convergence Divergence – MACD histogram). Real estate is a familiar and simpler area that in some ways resembles the FOREX market. For example, house prices are measured by month-over-month increases and year-over-year increases.

Let's pretend for a moment that and your wife just had a new born and wish to move to a four rooms apartment in Vancouver. If the prices in Vancouver were higher in August than they were in July, then we could safely conclude that demand for housing remained solid and that future increases are possible. On the other hand, first clue to a possible change of trend can be if prices in August suddenly declined from prices paid in July, especially after relentlessly rising for most of the year.

Real estate professionals know the weaknesses of their business, and it would be smarter to buy in month-over-month figures than in year-over-year data. House prices usually are higher in a year-over-year comparison – this data is frequently used to reassure the general public of the fact that the real estate market is still optimistic. To clarify this metaphor to the FOREX world, month-over-month figures in the real estate provide a parallel FOREX measure of rate of change (The speed at which a variable changes over a specific period of time), which is what the study of momentum is all about. Basically, like in the real estate market, pro-FOREX-traders will invest by the momentum and not on the price itself.