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