Momentum is based on the Newtonian notion that a body in motion tends to stay in motion. The classical economist David Ricardo translated momentum into investment terms with the oft-quoted phrase, “Cut your losses; let your profits run on.”
Momentum dominated the 1923 book, Reminiscences of a Stock Operator, about the legendary trader Jesse Livermore. Momentum-based velocity ratings were used in the 1920s by H.M. Gartley and published in 1932 by Robert Rhea. George Seaman and Richard Wyckoff wrote books in the 1930s that drew upon momentum principles.
Momentum also has strong roots in academic research. Alfred Cowles and Herbert Jones published the first scientific momentum study in 1937. They compiled stock performance statistics from 1920 through 1935 and found the strongest stocks during the preceding year remained strong the following year.