Momentum and Contrarian Strategy - Liquidity

Why do we say when we are doing the momentum strategy, we are putting demand on liquidity and instead when we use the contrarian strategy, we are supplying liquidity?

With a contrarian strategy, there are more sellers than buyers. You are providing that door for the exit.

If you want to buy when everyone else wants to buy, there may not be enough sellers; i.e., too little liquidity.

If you want to sell when everyone else wants to buy, you’re providing them stuff to buy; i.e., liquidity.

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