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Momentum is structural

Wednesday, June 17, 2020 9:26

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Momentum is the speed or velocity of price changes in a stock, security, or tradable instrument.

Momentum shows the rate of change in price movement over a period of time to help investors determine the strength of a trend.

Momentum = Price today – Price n periods ago

Momentum measures the velocity of price changes as opposed to the actual price levels themselves.

Momentum is tendency of stocks to move in direction of established trend.

Momentum is universal phenomenon

Momentum on 3 6 12 month tends to last for next 3 6 12 months.

Momentum on short time frame of less than one month is mean reverting

Momentum on 10 days or less timeframe with magnitude of 205 plus is even more likely to mean revert

Momentum on longer duration of 3 years plus tends to mean revert

Momentum is usually calculated as ratio of price to MA or as ratio of 2 moving averages

Momentum can be absolute (TI65 above 1.05 or MDT above 1.18) or relative when used to rank

Momentum used as absolute momentum tells you when it started and ended

Momentum used as sort only tells you how stock is ranked relative to other stocks

Momentum is used to narrow trading universe by focusing on stocks with high or low momentum

Momentum relative to S&P is used to select stocks in many methods

Momentum typically when used on 6 month timeframe is used with one month lag as one month momentum has strong mean reverting tendency (MDT25 is example of this c25/avgc126.25)

Momentum is used to isolate Top 25 or Top 50 or Top 200 stocks and then that list is used to find anticipation or pullback setups

Momentum is the most persistent tendency of stocks across world market

Momentum on lower priced stock is of higher magnitude

Momentum on higher priced stock tends to be lower

Momentum on low liquidity stocks tend to be higher

Momentum on high liquidity stock is lower

Momentum is foundation of Top 25 method

Momentum is the structural tendency exploited in ROC TI65, MDT , DT and 3/300

Source: http://stockbee.blogspot.com/2020/06/momentum-is-structural.html

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