Price Velocity measures how fast and in what direction the price is moving right now, and whether that movement is speeding up, slowing down, or reversing. While Price Trend tells you the overall direction, velocity tells you the momentum.
What It Measures
This metric compares the recent rate of price change to the average rate of change over the full period. It classifies the result into a "regime" that tells you both the direction and the acceleration of the price movement.
Think of it like driving: price trend tells you if you are heading north or south, while price velocity tells you if you are speeding up, slowing down, or making a U-turn.
Why It Matters for Resellers
Price velocity helps you time your sourcing decisions:
- Accelerating rises mean prices are going up faster and faster. Good for margins, but may slow demand.
- Decelerating rises suggest the upward move is running out of steam. The peak might be near.
- Reversals are turning points. A reversal from a fall means the bottom may be in — a potential buying opportunity.
- Accelerating falls are a warning sign. Prices are dropping faster, and buying inventory now means selling at an even lower price later.
How We Calculate It
- We calculate the average daily price change over the full analyzed period.
- We calculate the recent daily price change over the most recent 3 price change observations.
- We compare recent to average to determine if the price movement is accelerating, decelerating, or reversing.
- We combine the direction (rising or falling) with the acceleration to produce a regime classification.
- Price changes smaller than a minimum threshold are classified as "stable."
How to Read the Results
| Regime | What It Means | |--------|---------------| | Accelerating rise | Price is rising and the increases are getting larger. Margins are improving quickly, but watch for demand to soften at higher prices. | | Decelerating rise | Price is still rising but the increases are slowing. The upward move may be running out of steam. | | Reversing from rise | Price was rising but has started to fall. The uptrend appears to be over — expect lower prices ahead. | | Stable | Price is not moving meaningfully in either direction. No near-term margin pressure from price changes. | | Decelerating fall | Price is still falling but the drops are getting smaller. The downward move may be bottoming out. | | Accelerating fall | Price is falling and the drops are getting larger. Margins are shrinking quickly — avoid buying inventory at current prices. | | Reversing from fall | Price was falling but has started to rise. The downtrend may be ending — could be a good time to source. |
Reversals are the most actionable signals. A reversal from a fall can be a buying opportunity. A reversal from a rise is a warning to stop increasing inventory.
Limitations & Caveats
- Requires at least 4 price observations (typically weekly). Very new products will not have enough history for velocity analysis.
- Short-term volatility can create false signals. A single week of unusual pricing can make a stable product look like it is reversing.
- Velocity is a momentum indicator, not a prediction. A "decelerating fall" might bottom out and reverse, or it might continue falling at the same slower rate.
- Does not account for the cause of price changes. A price drop due to a new competitor entering is different from a seasonal adjustment, but the velocity metric treats them the same.
Related Metrics
- Price Trend — The overall direction of the price over the full period.
- Price Position — Is the current price high or low relative to history?
- Race to Bottom — An accelerating fall combined with increasing sellers may indicate a price war.