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A very naive momentum strategy

Heya,

Just started here and looking for some critic and suggestion on how to bulletproof this strategy. It did over 700% over 6 years, but stayed in cash for periods of time. The gist of the strategy is picking the top N stocks out of (US1500 - US500) with the highest delta between moving averages multiplied by the number of days the trend was happening.

Happy to receive feedback and suggestions.

2 responses

Awesome start! A couple of pointers to be aware of:

  1. I would recommend testing from 2007, just to see how much damage the financial crisis has on the strategy. I assume there'll be a painful drawdown of about 40-50%.
  2. Try using some trend filter on the spy or risk management. Examples like mean variance or risk parity help.
  3. Be careful on your position sizing. Make sure the total cash you have in your portfolio is realistic and make sure you don't have concentrated stocks (for example 50% in AAPL or something)

@Cheng Peng yes it did quite badly