Strategy Session… Reviewing the Rules and Backtest of the NDX Momentum Strategy
On Thursday Oct 1st 2020, we ran a one and a half hour Strategy Session Webinar for Mountain Trading's NDX Momentum Strategy. You can find the Daily Strategy Scan Signals, which are Daily Trade Ideas posted every single day that the market is open, here.
The foundational basis of the NDX Momentum Strategy is solid. It is based on the concept of past momentum (an object in motion tends to stay in motion) and mean reversion (getting in at an average discount). Of course, the Strategy uses a number of algorithmic enhancements in order to get much better than average backtest and out of sample results, and, the implementation as a portfolio-level Systematic Strategy with proper position-sizing and risk-management is what makes it all work in the real-world.
The Strategy Idea focuses on a short-term "pullback" condition within the context of an established uptrend. It's also worth while noting that the NDX Momentum Strategy only focuses on long side trading in Gary's implementation.
The NDX Momentum Strategy fits within the "Momentum" and "Mean Reversion" category or "spectrum" of strategies... the ideas that "the trend is your friend", and "momentum or trends persist" (long enough to have an edge and be profitable) -- and that prices tend to "revert" higher after "pulling back".
The NDX Momentum Strategy triggers typically after a short-term pull-back condition in an uptrend, where the expectation is that the uptrend will continue and resolve with a higher price than the entry point because the stock is still in demand and therefore uptrending, and the pull-back has hopefully completed. In essence, you are attempting to get in at a relative discount when price is statistically ready to resume higher so that the trade can continue to ride the next wave to the upside for a short-term "swing trade".
The results of the Strategy over the past 20+ years or so have been very good. As described in the backtesting, the Strategy averages over 30% CAGR with about a 23% Maximum Drawdown but lower Average Drawdowns. That puts the CAR/MDD (or MAR Ratio) at around 1.7 (and adjusted MAR at over 2) before commissions. These are quite impressive results.
You can learn more in the Webinar video presentation below, where Gary covers the following...
Objectives and Key Takeaways
- Understand how the strategy works
- What to expect when trading the strategy
- How to evaluate performance and risk
- How to automate the strategy
- Ways to manage the emotional side of trading
- How to try out the strategy and get involved in the SIG community
Please enjoy the Webinar Video Presentation, and if you have any questions, feel free to contact us.
If you haven't already, try out the NDX Momentum Strategy Signals for only $9.99 for the 1st Month.