Moving Momentum Strategy Test Results

This series of short articles was inspired by a client of mine who wanted to see the historical performance of a variety of trading strategy ideas which he had read about on other educational trading websites.

To begin with, I searched Google for the term “trading strategies” and wanted to test any quantitative trading strategy ideas that could be learned in articles which ranked on Google’s first page.

One of the highest ranked sites if searching for “trading strategies” was stockcharts.com, and so for today’s post I’ll be testing the Moving Momentum Trading Strategy explained in this article.

As per the images within the article, I will be testing the strategy on a basket of S&P100 stocks between 2007 and today.

Please also note that $0.01 per share transaction costs will be simulated ($2 minimum per trade).

Entries and Exits made on following days open.

Moving Momentum Trading Strategy Buy Signal Rules

The moving momentum trading strategy has 3 main buy setup criteria, these are:

  1. 20 day moving average is above the 150 day moving average indicating an uptrend.
  2. The stochastic oscillator moves below 20 indicating a pullback.
  3. The MACD histogram crosses above zero following a pullback.

The following chart provides 2 buy setup examples that were produced by $PG during May and July 2017:

 

Moving Momentum Trading Strategy Short Signal Rules

The moving momentum trading strategy has 3 main short setup criteria, these are:

  1. 20 day moving average is below the 150 day moving average indicating a downtrend.
  2. The stochastic oscillator moves above 80 indicating a bounce.
  3. The MACD histogram crosses below zero following a bounce.

The following chart provides 2 short setup examples that were produced by $OXY during Dec 2016 and August 2017:

 

Moving Momentum Trading Strategy Buy Signal Test Results

The following performance metrics were produced after testing the moving momentum buy setups on a survivorship bias free database of S&P100 stocks between 01/01/2007 and today.

To gauge the performance of a stock during the period which follows a signal, open positions were closed after 5, 10 or 21 days.

Here are the average results of all trades during the sample period:

The following table provides the average results of all trades during the same period if using a random entry signal :

I also tested the short only signals and they were not profitable if using the timed exits.

As the author of the original article stated, the moving momentum trading strategy shouldn’t seen as a stand alone system and the strategy was only provided as a starting point for further system development.

If you’d like me to modify and test any of the entry or exit rules in this article, or if you’d like me to test any other strategy that you’ve read about in another publication then please feel free to leave a comment below.

All the best,

Llewelyn

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