Momentum is a very unique trading style. Cliff Asness defines it as “a phenomenon where securities that have performed well relative to peers (winners) tend to outperform. Additionally, securities that have underperformed peers (losers) tend to continue to underperform” (Fact, Fiction, and Momentum Investing). Momentum is different from, and should not be confused with, Trend Following . Momentum ranks securities relative to peer performance, whereas Trend Following focuses on absolute price changes . Moreover, momentum takes no position on a market direction when it ranks securities by recent performance. Conversely, Trend Following is a useful tool that can be used to identify the trending behavior of a market . In the investment business, momentum is one of the newest strategies. It was officially discovered in the academic community in 1993. Given this recent discovery by academics there remains much skepticism around momentum’s efficacy as a viable trading strateg...
Price-based perspective on market behavior