Bet against momentum
Being short the assets that have been rising the most.
To bet against momentum is to be positioned so that you lose if the things that have been going up keep going up. Sometimes that is done on purpose. More often it happens by accident, when a rule that ranks assets by something else, such as how much funding they pay, quietly ends up short the ones that are running. The coins with the fattest funding are the coins everybody is chasing, so a basket that shorts the highest funding is a basket that shorts the winners.
It matters because momentum is one of the few tendencies in markets with a long record: what has been rising tends to keep rising for a while. A strategy that is short it without knowing has a headwind it never accounted for. It may collect a fee of a few hundredths of a percent every eight hours and then give back ten percent in a day.
In the logbook, the lesson is to ask what a ranking is really sorting. A rule can be described as one thing, a carry trade, and be another thing in practice, a short on the crowd's favorites. The test that shows it is to check how the strategy behaves in the months when momentum was strongest.
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Where this word comes up
First needed in the log entry H-016 · Collecting the funding rate is not free money. The price eats what the funding pays.
From the same entry: Funding rate, Market neutral, Out of sample, Perpetual futures, Sharpe ratio.