What Is a Momentum Trader?

Momentum trading strategy, that is, setting investment criteria for stock returns and trading volume in advance, and buying or selling stocks when stock returns or stock returns and trading volume meet the filtering criteria at the same time. The proposal of momentum trading strategy in the sense of behavioral finance originates from the research on the continuity of the medium-term return of stock prices in the stock market.

Momentum trading strategy

Jegadeesh and Titman (1993), in their research on the medium-term returns of asset-stock portfolios, found that prices have long-term regression trends with DeBond and Thaler (1985), and short-term price regressions at weekly intervals between Jegatesh (1990) and Lehmann (1990) The empirical results of the trends are different. The medium-term returns of the stock portfolio constructed at intervals of 3 to 12 months show continuity, that is, the medium-term price has a continuous change in a certain direction.

momentum

Momentum / reverse strategy means buy

Limitations on the application of momentum / reverse strategies: The theoretical assumption of momentum / reverse strategies is that the market is not always effective. Extraordinary returns can be obtained through model development, trend research and individual stock selection, and for outstanding investors, this This extraordinary return is sustainable to a certain extent. From a technical perspective, on the one hand, with the popularity of this zero-cost arbitrage strategy, momentum / reverse phenomena will disappear; on the other hand, momentum / reverse strategies will inevitably result in frequent transactions, and a large number of transaction costs will offset momentum / Profit from reverse strategy.