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Factor Investing

Please share your favorite factor and tell us why its your favorite 

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Momentum, coupled with overconfidence bias.

Just look at Activision’s run from $30 to $70, then back to $40. Or Micron from $27 to $63 back to $30. Macy’s dead-cat bounce from $17 to $40 and then to $25.

Made money on all three of these trades on the way up because of momentum. Lost most of the gains on Micron on the way down (loss aversion I guess).

Momentum is like a self-fulfilling prophecy. When something crosses a critical price point, and enough people see that as a sign and act on it, it snow-balls. People get overconfident, and it creates bubbles.

Tactics wrote:

Momentum, coupled with overconfidence bias.

Just look at Activision’s run from $30 to $70, then back to $40. Or Micron from $27 to $63 back to $30. Macy’s dead-cat bounce from $17 to $40 and then to $25.

Made money on all three of these trades on the way up because of momentum. Lost most of the gains on Micron on the way down (loss aversion I guess).

Momentum is like a self-fulfilling prophecy. When something crosses a critical price point, and enough people see that as a sign and act on it, it snow-balls. People get overconfident, and it creates bubbles.

I couldn’t agree more. Although, I’d rather just visualize a trend, and then follow it.

“What goes up, usually continues to go up” is something I wish more traders believed in. 

¯\_(ツ)_/¯ It be like that sometimes.