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.


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