Which concept describes situations where past price movements lead to further price changes in the same direction?

The concept that describes situations where past price movements lead to further price changes in the same direction is known as a positive feedback loop. In the context of financial markets, this means that when prices begin to rise, it can attract more buying interest, leading to further price increases. Conversely, if prices start to fall, selling pressure may intensify, pushing prices down even more.

This dynamic is particularly relevant to trends in market behavior, where the momentum created by an initial price move can encourage additional participants to enter the market in the same direction. As more traders react to the price movement, it reinforces the trend, making the price movements more pronounced. This is often observed in bullish or bearish market scenarios, where the prevailing sentiment feeds on itself.

In contrast, other concepts like negative feedback loops would operate in a manner that acts to stabilize prices by counteracting trends, while momentum persistence reflects the idea of continued price movement in the same direction but doesn’t encapsulate the self-reinforcing behavior of a positive feedback loop. The term "crime of small numbers" usually refers to statistical issues and biases and does not apply in this context. Overall, understanding positive feedback loops is essential for grasping how trends can become amplified in financial markets.