Definition ∞ Short-term momentum fade describes a market condition where a digital asset’s recent price upward or downward movement loses its impetus, leading to a reversal or a period of consolidation. This occurs when the buying or selling pressure that drove the initial price change diminishes, often due to profit-taking, exhaustion of market participants, or the emergence of opposing forces. It indicates a temporary weakening of the prevailing price trend over a short time frame, typically hours or days. Traders observe this to anticipate potential price corrections.
Context ∞ The discussion around short-term momentum fade often involves technical analysis, as traders seek to identify exhaustion signals using indicators like volume and candlestick patterns. A critical debate centers on distinguishing between a temporary fade and a more significant trend reversal. Observing a short-term momentum fade provides crucial context for intraday and swing traders to adjust their positions and manage risk effectively.
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