Average momentum is a smoothed trend reading: the average of an instrument's percent price change over 1, 3, 6 and 12 months, in percent. One signed number says how strongly, and in which direction, the instrument has been trending. Fincanva uses it as an Indicator on a risk condition and as a ranking metric of the Ranking-based allocation method.
Also seen as: momentum, trend strength
How is average momentum calculated?
- the percent change of the adjusted close over the last month
- the percent change over the last 3 months
- the percent change over the last 6 months
- the percent change over the last 12 months
In words: measure how far the price has moved over the past month, three months, six months and year, then average the four percent changes. Adjusted means the closes are corrected for dividends and splits, so a payout or a split does not read as a price move. All four spans carry the same weight, so no single horizon dominates — and one sharp month moves the average by only a quarter of its own size.
How does Fincanva handle it?
- On a risk condition it is the Indicator "Average momentum": it only transforms the watched series, and the switch between Risk-On and Risk-Off is decided by the condition's thresholds. The Period field is not shown and any value already entered is cleared — the four spans are fixed.
- In a strategy using Ranking-based allocation it is the metric "Average Momentum", and the hint reads "Instruments are ranked by their average momentum — highest first." It decides the order only; how many instruments are held is capped separately by max positions.
- The other Indicator options are raw price, Simple moving average and Percent change.
What does it look like in practice?
An instrument closes today at 110 (adjusted). A month ago it closed at 105, three months ago at 100, six months ago at 95 and twelve months ago at 88. The four percent changes are +4.76%, +10.00%, +15.79% and +25.00%, so average momentum is (4.76 + 10.00 + 15.79 + 25.00) ÷ 4 = +13.89%.
Now suppose the last month reversed hard and today's close is 96 instead. The four readings become −8.57%, −4.00%, +1.05% and +9.09%, and average momentum is −0.61% — barely negative, even though the instrument now sits 8.6% below where it stood a month ago, because two of the longer spans are still positive and each span carries a quarter of the weight. That damping is the point of averaging four horizons, and it is why the reading turns later than the price does.
Why does an instrument have no momentum reading at first?
Because one of the four spans reaches back further than its history goes. If any one of the 1-, 3-, 6- or 12-month readings cannot be computed, that day is skipped entirely — average momentum produces no value rather than averaging the three spans that do exist. In practice that means the first year: nothing is ranked or compared on average momentum until the instrument has a full 12 months of prices behind it, because the 12-month span is the last of the four to become available.
Once the history is long enough, a missing day inside it does not skip anything — a span that lands on a date with no bar reads the most recent bar before it, so holidays and suspensions are covered rather than blanking the reading.
How do you read a high or low average momentum?
A higher reading means a stronger recent uptrend in the series, and a lower one a weaker trend or an outright downtrend. The reading is signed: a positive number describes a series above where it stood across the four spans on average, a negative number one below, and a reading near zero a series with no clear direction. Fincanva's own preset copy reads it that way — the shipped TIPS risk template reads "Risk-Off when momentum turns sharply negative", and the Ranking-based hint ranks the highest readings first.
Because three of the four spans are long, average momentum reacts to a turn later than the price itself does. That is the usual trade-off of any smoothed trend measure: fewer reactions to one-off moves, and a later reaction to a real turn.
This page describes how a reading is interpreted, not what to do about it.