13H·

First tranche of Momentum shares

The trend-following project I mentioned entered its first round today with the following ten stocks:

AeroVironment $AVAV (+4,31 %) , AppLovin $APP (-18,14 %) , Innodata $INOD (+2,12 %) , IREN $IREN (+14,12 %) , Kraken Robotics $PNG (+15,08 %) , Micron Technology $MU (+2,25 %) , Oklo $OKLO , Ondas $ONDS (+9,3 %) , Nebius $NBIS (-1,82 %) and Robinhood $HOOD (-2,21 %) . Each equally weighted, in a Trading212 Pie.


In my opinion, these companies had solid ratios and met the desired technical metrics (mostly beta > 1.5 ; 1M performance > 20% ; price > 50EMA).


Hopes / forecasts:

The model is designed to avoid the severe drawdowns that normally accompany high risk high reward stocks. The stocks have been selected so that all have a distance of about 15% from their 50d EMA.


To explain: the EMA is a moving average that reacts more strongly to trends or trend changes. In my experience, it often serves as support and a downward break may indicate a trend reversal.


This is theoretically perfect for this model: as long as the share is trading above its EMA, it is in a sustained uptrend (which the model wants to "surf" 🏄‍♂️); if it falls below it, it is sold. This mechanism therefore acts more or less like a dynamic trailing stop loss.

However, this should not happen immediately, as all shares are still above this average.


No investment advice, this is still an experiment. Updates to follow.

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10 Commentaires

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Good luck and keep us up to date
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It works well in bull markets. In sideways markets, false signals follow, which can lead to slight or medium losses; in bear markets, it practically does not work at all.
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@dividend_dynamo_2673 And we are currently in a bull market. I'm not planning to hold this as a long-term part of my core, but as an occasional yield booster.
I think the false signals in sideways markets are unlikely, as I'm not trading an index but individual stocks, and there are usually some of them that have good momentum even in sideways markets.
If the shares go against the grain, they are soon sold, and after a sell signal we wait until new momentum builds up, which I should perhaps have mentioned.
I'm sure the whole thing can also be applied to short positions, but that's not in my interest.
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I can't wait to see how this continues 👍🏼
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Have you backtested the strategy? What CAGR, Vola and MaxDD does the strategy have?
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@fastlane No, I have not. Because I don't think that's possible or sensible. The stocks are hand-picked, and I don't know of any software that can pick and simulate stocks in the backtest exactly according to the set criteria (if you know of any, please let me know 🥲).
Vola is certainly high, but I accept that.
The drawdown for a single share is never actually >20%, as the EMA is about that far down and is sold immediately if it falls below the close. After this trigger, the share is put aside for a few months and monitored until a new buy signal emerges.
The prerequisite for high drawdowns to occur in the overall strategy would be that almost all the shares bought reverse immediately after purchase, break their upward trend and run into the SL. I think this is unlikely, but it is possible.
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Doesn't look bad, Simon, i'm quite curious to see the result of your experiment , please keep us updated :) By the way, how are you planning to keep the stocks under control? is there any way to automate it? or you will keep an eye on them one by one and modify the stop loss line manually?
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@Xavi80 Thanks, will do. There is a way to automate the signals for selling them. But that would require a paid TradingView subscription, so I just check them manually after every days close 😄
There isn‘t a stop loss line in that sense, the signal to trigger the stop loss is the Price closing below the 50-day exponential moving average.
I assumed here that that is a sufficient stop loss, since that line hardly ever is further below the price than 20-25% for these stocks except for large gaps (e.g. after earnings day). So that line acts as a dynamic stop loss.
After a stock has been sold due to that signal, I will keep an eye on them, should they regain their trend.
@Simon_n Alright got it now, you will use the closing price ignoring if the price line cross the ema 50 while the market is open. Since this is an experiment maybe i'll try it too in a safe enviroment like a demo account in IBKR. Here we all have our porfolios for the long run, but hey, if at the end of the day the success rate of this experiment is high enough to leave a possitive balance even if it implies some losses it could be quite profitable. Working as a stock babysitter one hour a day is much better than most normal jobs :D
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@Xavi80 Yes, definitely use a demo account for that. I only use a very small percentage of my portfolio balance for it too.
There‘s still lots of variables to tweak, so feel free to experiment with those in a demo account. I‘ve found an EMA length of 50 to be a solid compromise between too many falls alarms (with shorter lengths) and too much delay in drawdowns (with longer lengths) from just looking at the chart.
The amount of stocks is also variable, but I would assume that more stocks give a more consistent return and less overall drawdown.
That’s all just assumptions though, lets see how it works out 🫡
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