The 10 Best Books on Momentum Trading
Looking to expand your knowledge on Momentum trading? Our experts have selected the the best books to get you started!
Imagine a trading strategy that has outperformed the market on average for decades, generating desired outcomes over the long term for those who've mastered it. Welcome to the world of momentum trading, a strategy that has generated an average annualized return of 9.96% from 1965 to 2015 (source: Jegadeesh and Titman, 2011). Yet, despite its proven success, momentum trading remains shrouded in mystery for many investors, often seen as too complex to grasp or conquer.
At its core, momentum trading is about identifying and capitalizing on the continuation of existing trends in the market. The challenge lies in accurately analyzing momentum indicators and executing trades based on these insights. This may seem daunting, but the good news is that with the right resources, anyone can become a skilled momentum trader.
To help you unlock the secrets of momentum trading strategies, we've compiled a list of must-read books that cater to both newcomers and seasoned investors alike. Available at Amazon or your local bookstore, these titles will guide you through the intricacies of momentum trading, empowering you to tap into its remarkable potential for success. So, why wait? Dive in and start your journey towards mastering momentum trading today.
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1. Market Momentum: Theory and Practice
Written by Stephen Satchell and Andrew Grant, “Market Momentum” is an invaluable reference guide for both experienced financial professionals as well as students. The book focuses on explicating the behavioral and statistical causes of market momentum. It also provides invaluable insight on implementing practical investment strategies. This offers not just theoretical advice on momentum trading but also actionable strategic approaches investors can leverage for their own success.
Overall, the book is an excellent introductory text to the phenomenon of market momentum. It also includes recent academic and practitioner research, thus offering an updated perspective as well. It is recommended for investors looking for a solid foundation for their own momentum trading, but there is enough information and context in the book to make it ideal for more advanced students as well. The result of this is that “Market Momentum” is an excellent reference guide for continued trading, even after you've finished it.
2. Trading on Momentum: Advanced Techniques for High Percentage Day Trading
“Trading on Momentum” by Ken Wolff focuses on how and why to embrace momentum trading strategies for short-term success. The book illustrates its points with hard data in the form of detailed examples, graphs and charts to highlight the processes behind momentum trading. This makes it much easier to understand many of the sometimes difficult-to-grasp concepts and practices inherent to momentum trading.
“Trading on Momentum” also goes far beyond the basics, instead progressing to more advanced tools and techniques that momentum traders leverage for greater success. This includes a thorough explanation of the psychological factors that momentum traders must understand to maximize their investments. As behavioral psychology plays a major role in momentum trading, the inclusion of this information is highly useful. For those who want to get started, “Trading on Momentum” is an excellent overview on how to leverage momentum trading techniques for day trading.
3. Learn to Trade Momentum Stocks
Written by Matthew R. Kratter, “Learn to Trade Momentum Stocks” is an excellent book for beginners interested in learning more about momentum trading. The book is succinct and offers straightforward guidance in plain, easy-to-understand language, making the information highly accessible. Kratter focuses on practical guidance. This makes it an ideal book for anyone who is less interested in theory and more focused on finding effective approaches to momentum trading.
The major focus is on understanding primary indicators such as 50- and 200-day moving averages for entering and exiting momentum stock trades. The strategies discussed are ideal for anyone who has little to no knowledge of investment strategy. But for intermediate or advanced traders, “Learn to Trade Momentum Stocks” is unlikely to provide as much utility. This makes the book a good choice as an initial guide before moving on to a more advanced book on this list.
4. Momentum Trading: Trading in Stock Market
Another excellent choice because of its comprehensive approach to the subject is “Momentum Trading”by Priyanka Gala. This short but detailed guide covers the basics of what momentum trading is and how to become a momentum trader. Gala pays special attention to educating the reader about the risks involved in momentum trading as well as how and when to select stocks to trade. Other information covered in the book includes the importance of volume trading and how to formulate proper cover calls. This is especially useful for those who are just starting off on their momentum trading journey.
Instruction on effective momentum trading strategies, and how to identify situations where trades may go wrong, rounds out the information contained in this book. This makes “Momentum Trading”another excellent starting point for anyone who wants to begin learning more about momentum trading. Again, much like the last entry on this list, the book is not necessarily a strong choice for experienced traders. But if you're looking for a solid foundation upon which to build, “Momentum Trading”may be a good choice.
5. The Momentum Investment Philosophy: An Innovative Strategy for Higher Returns with Lower Risk
Written by Gary Antonacci, “Momentum Investment Philosophy”distinguishes itself by focusing on more than just momentum trading strategies. The book also includes crucial contextual information on momentum trading in general. This includes information on the academic history behind the strategy. As a result, Antonacci's book is both sophisticated and sufficiently introductory. The author pays a lot of detail to achieving risk-managed exposure across asset classes.
Criticisms of this book are few and far between. One consistent criticism is the relative lack of information provided on differential risk factor analysis beyond a few simple yet effective methods. Despite this limitation, Antonacci's book is otherwise well-reviewed and highly popular. On a final note, this book can also be found under the title “Dual Momentum Investing.” Rest assured that it is indeed the same text with a revised name.
6. Quantitative Momentum
“Quantitative Momentum” by Wesley R. Gray and Jack R. Vogel provides clear and concise guidance for applying momentum-based strategies to existing equity portfolios. The book takes a reason-based approach to investing backed by exhaustive academic research. The book is also excellent for gaining an understanding of behavioral biases and how to exploit them to your advantage while investing. Many have praised the authors for their comprehensive and thoughtful approach to these topics.
“Quantitative Momentum”is often considered a good counterpart to “Quantitative Value,” the authors' previous book. However, it's not a requirement to read both to benefit from “Quantitative Momentum.” Nevertheless, “Quantitative Value”can add context to some of the discussions in this book. This makes it a recommended companion text for investors looking for a more comprehensive education.
7. Momentum Masters: A Roundtable Interview with Super Traders
In "Momentum Masters" by Mark Minervini, Bob Weissman, Michael Covel, and Dan Zanger, the authors have compiled a series of roundtable interviews with four highly successful momentum traders. Each trader shares their personal trading experiences, strategies, and insights. This book offers a unique opportunity to learn from the best in the business and gain an understanding of the mindset that drives their success. The candid and in-depth discussions provide valuable lessons and practical tips for anyone looking to excel in momentum trading. Whether you're just starting out or an experienced trader seeking new perspectives, "Momentum Masters" is a must-read.
8. Momentum: How to Build, Manage and Sustain Personal Momentum
Gary Ryan Blair's "Momentum: How to Build, Manage and Sustain Personal Momentum" is a fascinating take on momentum trading from a psychological perspective. While not solely focused on trading, this book discusses the concept of momentum and its application to achieving personal and professional success. Blair provides valuable insights into how momentum can be harnessed in various aspects of life, including trading. The book is filled with practical tips and exercises to help readers build, manage, and sustain momentum in their daily lives. This unconventional approach to momentum trading offers a fresh perspective that can help traders maintain the right mindset for long-term success.
9. The Momentum Factor: 5 Keys to Peak Performance
In "The Momentum Factor: 5 Keys to Peak Performance," authors JJ Birden and Kelly Riggs delve into the factors that contribute to achieving optimal performance. Although this book is not specifically about momentum trading, it does offer invaluable insights into the psychology and habits required for peak performance. By understanding and implementing the principles outlined in the book, traders can develop the mindset and discipline needed for successful momentum trading. The authors use real-life examples and case studies to illustrate the impact of these principles on various aspects of life, making the book an engaging and informative read.
10. Mastering Momentum Trading: A Practical Guide to Identifying and Trading Breakouts
"Mastering Momentum Trading" by Alan Farley is a comprehensive guide to identifying and trading breakouts, a critical aspect of successful momentum trading. The book is packed with practical information, detailed explanations, and real-world examples that will help traders develop the skills necessary to excel in momentum trading. Farley covers everything from the basics of momentum trading to advanced technical analysis techniques, making this book an invaluable resource for traders of all experience levels. With its clear, concise writing and actionable advice, "Mastering Momentum Trading" is an essential addition to any momentum trader's library.
Closing thoughts
The world of momentum trading is often maligned as too obscure or even ineffectual in the face of more traditional trading strategies. However, despite its detractors, momentum trading has remained an effective investment strategy for quite some time. For beginners, the challenge is to overcome the difficulties in understanding the techniques for implementing momentum trading strategies effectively. These difficulties are many, especially when it comes to basic comprehension. The result, invariably, is that investors new to momentum trading fail.
As you dive into the world of momentum trading with these invaluable resources, here's an article to help you evaluate what platform to automate your momentum strategies with.
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