InvestorQ : Are there are any good books to read on understanding market momentum?
Archita Jajjoo made post

Are there are any good books to read on understanding market momentum?

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Ria Jain answered.
2 years ago

One of the authorities in market momentum is the great trader Jesse Livermore. He is the one to point out the need to trade on the right side of market momentum and stock momentum. One of the greatest stock traders in history, Jesse Livermore, famously said that, “There is no bull side and no bear side. There is only the right side”. What Livermore meant was that the key to trading is to stay on the right side of market momentum. When the undertone is weak, smart traders use every rise to sell in the market. Similarly, when the undertone of the market is strong then savvy traders will use every dip to buy into stocks. Again, there is a corollary to this point. You must not only focus on market momentum but also on stock momentum. Let us understand this more clearly. The Nifty was up by 25% each year in the last 2 years but during this period pharma was a gross underperformer. It is not just enough to identify the market momentum correctly but it is also important to trade in stocks which have momentum in their favour. Even in a fantastic bull market as we saw in the last two years, you would not have made any money buying into pharma stocks. At the end of the day, it does not matter if your trade was very smart and innovative if it did not generate profits. For that you need to listen to the markets and obey the orders of the market. Understand the language of the market and trade accordingly.