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Momentum Factor Strategy — Monthly Rebalance, S&P 500 Universe

r/algotradingstocksMonthly rebalanceby reddit_community

Monthly momentum: rank S&P 500 by 12-1 month returns. Buy top 20 equal weight. Rebalance monthly. 14.2% CAGR vs 9.8% SPY backtest. 2000-2024.

ENTRY RULES

At month end, rank all S&P 500 stocks by (12-month return minus 1-month return) | Buy top 20 stocks by this ranking | Equal weight allocation (5% each) | Skip stocks with earnings in next 5 days

EXIT RULES

Sell any stock that drops out of top 30 at next rebalance | Rebalance on last trading day of each month | If SPY below 200 SMA, go 50% to cash | If SPY below both 50 and 200 SMA, go 100% cash

INDICATORS

12-Month Momentum1-Month ReversalSMA(200)Market Breadth

ORIGINAL POST

345

r/algotradingposted by reddit_community

Momentum Factor Strategy — Monthly Rebalance, S&P 500 Universe

Simple momentum factor: each month, rank all S&P 500 stocks by 12-month returns minus last month return (to avoid short-term reversal). Buy top 20 stocks. Equal weight. Rebalance monthly. Backtest from 2000-2024: 14.2% CAGR vs 9.8% for SPY. Max drawdown similar to SPY during 2008 but recovery faster. The 1-month exclusion is the key — pure 12-month momentum has worse drawdowns.

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Momentum Factor Strategy — Monthly Rebalance, S&P 500 Universe | iGotFomo Strategies