Price Momentum

This is why momentum investing works.  And it is self reinforcing.  From Tom Brakke:

Machines ~ While there are quantitative strategies of all kinds, many are driven by what’s worked and what’s working.  The absolute price levels of the market or of a security are of little concern; it is their movements that matter.  And, yes, the machines might even trigger actions themselves with some “momentum ignition” if that has proven to be successful in the past.

Momentum players ~ Wherever the spark of momentum comes from, there are large numbers of momentum traders/investors in the market.  As confirmed by academic analyses and supported by sociological observations, price momentum is a powerful force and it drives behavior by lay and professional players alike.  Some forthrightly state momentum as their strategy, while others practice it under cover of a more marketable philosophy.

Advertisements

Leave a comment

Filed under Financial

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s