A Note on Visualizing the Optimal Time for Closing a Momentum Trade

In this paper, a simple method is presented to visualize the optimal time for closing a momentum trade. The decision criterion is based on discounted financial asset price (like stock) at which discounted price is computed with a minimum attractive rate of return. It is seen that as soon as, the discounted price starts decreasing is the best time for closing a momentum trade.

Keywords: Geometric Brownian motion; Momentum trade; Stopping time.