The Chartist – Large Cap Momentum Strategy

Description of Large Cap Momentum Strategy

Momentum is a logical, time tested approach supported by vast amounts of academic and industry research gathered over many decades. Stocks that have done well recently tend to continue doing well in the following months and even years. This strategy specifically targets Large Cap stocks that are outperforming their peers, although it can be used on any universe of stocks. The strategy trades just once a month.

The strategy allows users to generate buy and sell signals, run backtests and adjust a myriad of parameter settings without needing to understand coding. Other filters include price, volume, turnover, market regime and two position sizing modes. The code is completely viewable and editable by the user.

This strategy attempts to buy a concentrated set of strongly trending Large Cap stocks that are outperforming their peers. It will hold a position until its trend strength deteriorates or is outpaced by a stronger stock. A unique dual filtering mechanism will ensure stocks are only bought when market conditions are favourable. The strategy will automatically revert to a cash position when market conditions are unfavourable. The strategy trades just once a month.

All parameters are adjustable to enhance risk adjusted performance or trade frequency. The strategy also enables the user to test on specific universes including historical constituents for testing without survivorship bias.

The Large Cap Strategy uses a concentrated portfolio and has minimal entry parameters and has not been optimised. Testing was conducted on daily bars across some 1,000 individual symbols over a 20-year period. These results are shown below for the Australian and US markets.

About The Chartist

The chartist is a unique investment advice service for those who don’t have the time or skills to succeed in today’s stock market environment.

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