7. MOMENTUM

 

◆ Before explaining momentum

 

Momentum is a physics term that refers to the tendency of a particular object to change continuously in one direction. In investing, momentum can be used as an indicator of whether a particular asset class is moving upwards or downwards.

 

 

Momentum investing refers to the tendency of investment returns to be sustained. A good investment will continue to be good, and a bad investment will continue to be bad. It is also a factor that has been verified through numerous studies and papers.

 

 

It is classically derived from Isaac Newton's first law of motion. Unless an external force is applied, all objects try to maintain their state. And in 1839, classical economist Davidu Ricardo applied the momentum principle to investing, where he said, "Cut your losses, let the gains run." He followed the principles of good will and retired at the age of 42, earning a fortune of $65 million in today's money.

 

 

In the early 20th century, Edwin Lefevre's famous book <Reminiscence of a Stock Investor>, first published in 1923, also dominated the momentum-related content. As Jesse Livermore said, "To make big money, you have to judge the trend of the market as a whole, not individual ups and downs."

 

 

 

◆ Types of momentum

 

Short-Term Momentum: A trend-following strategy is also an investment method of momentum. The volatility breakout strategy I'm actually using is also a short-term momentum/trend-following strategy. This is also a strategy that condenses the implication of buying high and selling at a higher price than the concept of buying cheap and selling high.

 

Absolute Momentum: Momentum as an indicator has a method of measuring the strength of momentum by measuring how much it rises or falls in 3 months, 6 months, or 12 months in price.

 

Relative Momentum: A method of utilizing momentum that can be used for dynamic asset allocation by calculating the momentum of various asset classes such as stocks/bonds/commodities/gold.

 

Dual Momentum: An investment method that combines absolute momentum + relative momentum to invest only in asset classes with the strongest momentum.

 

 

The momentum investment method is a factor that is widely and widely used in trend-following trading, stock factor investment method, and dynamic asset allocation using asset classes such as stocks/bonds/commodities/gold.

 

For those who want to dig deeper into momentum, I recommend Gary Antonacci's <Dual Momentum Investment Strategy>, which has been translated into Korean and distributed in the market. If you want to study short-term momentum trading in the cryptocurrency market, we recommend Kang Hwan-guk and systrader79's <Virtual Currency Investment Magic Formula>.

 

Go to Quant Pick's Volatility Breakthrough Trading Backtest Results (1)

 

 

Go to Quant Pick's Volatility Breakthrough Backtest Results (2)

 

 

 

◆ Trading View Momentum Settings

 

 

There is also a momentum indicator in Trading View, so it would be good to use it as a reference. Click on the “Momentum” indicator at the top, and enter the desired momentum calculation section, such as 7 days / 30 days / 365 days, in the set value.