Money From Momentum: Positive Feedback Can Drive Returns
Positive feedback trading takes into account trends in the stock market. It posits an alternative to theories that advocate buying the market or tracking corporate performance.
According to advocates of technical analysis, it is possible to discern trends and cycles in securities prices that can be traded profitably. The simplest form of this is momentum trading—buying securities with prices that are rising and selling those with prices that are falling. Recent studies find that this can work.
Increasingly, financial economists are uncovering evidence of price trends in various markets. Many markets that appear random are not. Rather, they are complex and hard to predict. The contradictions between experience and accepted theory have led researchers to look for an explanation.
...To continue reading this article you must be registered with AAII.
Already registered with AAII? Login to read the rest of this article.
to read this article and receive access to future AAII.com articles.