Du, D. And always be prepared for unexpected reversals or corrections that take place.
Once a momentum trader sees acceleration in a stock's price, earnings or revenues, the trader will often take a long or short position in the stock in the hope that its momentum will continue in either an upward or downward direction. In the middle of the trip, it stops accelerating but travels at a higher velocity.
This paper will emphasize the importance of country selection for the profitability of momentum strategies since academic literature lacks the comparison of the momentum profitability across Emerging and Developed stock markets.
Bechev, I. If a trader wants to use a momentum-based strategy, he takes a long position in a stock or asset that has been trending up. Think of it like the momentum of a train. DeBondt, W. If the trend line is down, the trend is down and the momentum investor sells the stock.
They attempt to achieve alpha returns by investing in stocks that trend one way or another.
Updated Jan 18, What Is Momentum? Helmenstein, C. References 1.