Trend following · Beginner · Weekly rebalance every Friday
Momentum Rotation
How it works, and when it doesn't.
You're not predicting direction — you're identifying who is already winning and staying with them until they stop winning.
Holding AAPL, META
Top momentum leaders (63d): AAPL=16.5%, META=5.8%. RF leadership scores: AAPL=51%, META=36%. Weekly rebalance active.
Why it works
Momentum is the most documented anomaly in financial markets. Assets that outperformed in the last 3–12 months tend to keep outperforming for the next 1–3 months. This is caused by institutional underreaction, trend-following flows, and earnings momentum.
The signal logic
- Rank all assets by 63-day (3-month) return every Friday
- Buy top 2 assets with positive absolute return
- If no assets have positive return, hold cash
When it fails
Momentum crashes. After sharp market reversals (March 2009, April 2020) the biggest winners become the biggest losers as crowded trades unwind.
- Best market
- Bull markets with sector rotation, trending macro environments
- Worst market
- Momentum crashes, sharp reversals, low-dispersion markets
Backtest
| Sharpe ratio | 0.90 |
| Annual return | 25.1% |
| Worst drawdown | -43.5% |
| Trades in the backtest | 74 |
Backtest on daily bars, positions taken the bar after the signal (no look-ahead).
Momentum Rotation, live.
Re-scored after every close.
The platform runs this and 32 other strategies against the live tape each day — with the evidence behind every number.