Velocity of Money (VoM)

GENERAL DEFINITION

What is meant by velocity of money?

It can refer to the income velocity of money, which is the frequency at which the average same unit of currency is used to purchase newly domestically-produced goods and services within a given time period. In other words, it is the number of times one unit of money is spent to buy goods and services per unit of time.

How do you calculate the velocity of money?

The equation for GDP is: GDP = Money Supply x Velocity of Money. To solve for velocity in our example, we rearrange the equation to get Velocity = GDP / Money Supply, or ($2,400 / $100). Velocity of money in our two person economy is 24.

What affects the velocity of money?

The equation simply states that money growth causes inflation. … Money velocity increases only when the people spend or invest it. Therefore, any factors that cause people to hold money will decrease the velocity of money, while factors that increase spending or investment will increase the velocity of money.

What is meant by money growth?

Money supply is the entire stock of currency and other liquid instruments circulating in a country’s economy as of a particular time.

WGS Interpretation of VoM in Stock Market

Rotation of Fund

Rotation of Funds and continuing investing generates velocity of money in stock market investment based on our methodology. 

Being able to circulate the money constantly makes a huge impact on ROI. Usually money circulates much faster on a bull market as compared to bear market. Hence the Velocity of Money (VoM) is key of ROI without the need t invest new funds. 

What to Circulate ?

Machine learning is key based on what we do to identify breakouts resulting into constant circulation of money. Markets bull or bear do generate opportunities daily. The number of opportunities to invest depends on bull or bear conditions. But opportunities are always there and is not seasonal. 

Why algo trading dominates tradition trading ?

The use of technology such as machine learning is lot better than traditional investment. One of the main reasons why institutions all over the world are investing in millions on research and machine learning techniques along with High Frequency Trading (HFT). In traditional investment one cannot over come human emotions.