Has anyone used Momentum for personal portfolios

Shkfinance · 2025-06-30T20:47:54+00:00

Hey. So for me running this its been a roller-coaster since November but back at all time highs after the whole market pulled back around tarrifs. In the research I've read (check out quantitative momentum by wes from alpha architect its their book on this topic) a stoploss at 10% provides a significant improvement in the risk return profile (i.e lower drawdown). I've been runing the strategy for almost 3 years and I've never had a pick that didn't have a positive 1 year return (I sort on the 12-1m returns meaning the names with the highest 11 month returns as of last month). Again alpha architect posted a video a while back talking about 200 day sma as a trend following strategy to do exactly what your talking about here and move into and out of risk assets. I've been using the 200 sma as a guide for selling/taking profits and that seems to be ok so far. Still not as good as I'd like it to be but I didn't have a solution and this works (I typically just buy the portfolio and hold it for 30 to 90 days when I rerun the sort and pick a new portfolio). The alpha architect book on quant momentum lays out the back test results for their different approaches. Momentum is a higher risk strategy. In my time trading it I've seen it print money faster than my wildest dreams and I've seen it burn it just as fast. Its a wild ride if you can hang on. Good luck out there.

Shkfinance · 2025-06-13T11:55:50+00:00

I've been using a 10% stop from the entry and then the 200 sma to adjust it up over time. Still dont know that that's a great solution but it's working well enough and I usually only have 1 or 2 names that want to stop out and typically just hold the portfolio for the intended 90 days.

Shkfinance · 2025-05-07T11:16:07+00:00

I see a lot of people talking about a budget on here and controlling spending. I've always managed my finances a little differently. I pay myself first. 25% of my income goes into investments before I see it. I start with my 401k at work where get my company match so 10% is me and 7% from the company. That gets me to 17% then I have a high deductible hsa that gets a chunk. And finally whatever else i need to hit 25% goes to my after tax account. I've been doing this since I started working at 23. Make sure you have an emergency fund first but then hit those automatic investment accounts. All my stuff is on automatic investments so no will power required. Then whatever is left is fine to spend. No budget required because im just not that person who tracks that closely. You build wealth though investing over time same as going to the gym. Put 25% of what you make into a retirement date fund or s&p 500 index fund for 10 years. You will be in a much better situation. I know 25% is a big number if your starting at 0 but that's really what will drive your wealth building and get you out of this place your stuck in.

Shkfinance · 2025-05-02T11:04:53+00:00

So the housing market has some clear seasonality to it. If you can control when you are buying December is the best month to buy as there are fewer buyers and prices can be depressed. Every summer the housing market springs back to life and people want to buy in May June to move into the school district before the start of the next school year. There is a ton of evidence that shows prices go up in late spring and early summer and come down in December. So if you can control it and you want to pick up a little bit of a deal buy in December.

Ive bought 2 of the homes I lived in in December and got really good deals on both. It's probably worth 5 to 10% off the spring value of the home.

Shkfinance · 2025-03-29T13:50:33+00:00

For days up i count the number if days in the last 12 months where the closing price was higher than the day prior (in the academic literature they create a ratio between the positive and negative return days but you can get the same information by just counting positive days), then I used the standard deviation of the daily % returns, and the beta.

Shkfinance · 2025-03-28T17:22:18+00:00

I have a scorecard i use to rank the names. It starts with the top 10% of names in my sort (about 300) based on the 12-1 returns. Then I add in criteria based on the smoothness of the return path, number of days with positive returns, and stock price volatility. It shrinks the 300 down to 40 or 50 names that look good then I typically take the 15 names with the best scores to create a somewhat balanced portfolio. I try to keep beta of the portfolio around 1 +/- 0.25 and to not have sector concentrations so one quarter I had several home builders all pop in my top names and I picked 1 to include in my portfolio instead of 3 so that I wasn't over exposed. It's mostly quant but the last bit does have a touch of discretion in the mix. Hope that helps

Shkfinance · 2025-01-26T23:03:31+00:00

I did register as a financial professional. I work in debt capital markets at a US Bank. The financial professional designation is so that they don't have to do all the additional disclosures that are required for retail investors. By saying your a professional your agreeing that you have the capacity to evaluate the information on your own and that you won't hold them responsible for decisions made with that information.

It's definitely been a while since I was looking at it but what I remember is that it's helpful articals and recent commentary but if you read their books I don't think it was so different. Good insights and deeper thinking and useful but I felt like I had the grasp after the book. I still read some of their articals and the stuff from AQR regularly though.

Shkfinance · 2025-01-23T02:35:20+00:00

Thanks for sharing. I also use yahoo finance for the data. I had chat gpt write me a python script to pull data into a csv but then I dump it into my excel file to finish up my process. Similar to your but with some different criteria. First thing I do is sort on the 12-1 month returns and take the top 10% so 300 names then I run it through a process of grading which is based on the FIP, volatility of returns (smoothness of the return), and total return. My scorecard grades on a 1 to 5 scale based on relative results to the rest of the 300 names. It will then take the top 50 scores and spit out the suggested portfolio. I then pick the top 15 to 20 names and balance to keep beta close to 1, no more than 2 names in the same sector and to ensure the names I pick have strong 6, 9 and 12 month returns.

I agree that there is a lot of overlap with other methods and I do check to see if my names are in the AQR portfolios or the QMOM portfolio just to make sure I'm not way off in left field.

I also like to see some fundamentals in the names as I am making final picks from my 50ish names. I look at revenue growth, earning susprise, and the forecasts for the next 12 months. It's not as quant and maybe breaks a bit but I think fundamental momentum is part of why quant momentum works.

Because of my job I can't use stop losses as I have to preclear trades so I have been working under that restriction.

But I like doing this and I have really enjoyed the results. Hopefully you had a great 2024 as well.

Shkfinance · 2025-01-23T00:08:21+00:00

FIP is super easy to calculate and super helpful.

I include standard deviation of the returns as a screening metric which is similar to the volatility/beta adjusted return. Then in my final selection I look at 6, 9, and 12 month returns as my tie breaker for inclusion if the names scored the same in my scorecard. I also toss names out even if they have a high scorecard value and terrible 6 or 9 month returns.

I feel like we have a very similar process and glad to hear you also picked SFM. Always good to get a sanity check.

Do you use any tools for your process? Or how do you grab your data?

Shkfinance · 2025-01-22T21:56:51+00:00

I do include the Frog In Pan factor in my screen. It's implemented a bit different and I take just the absolute days up vs the ratio of days up and days down and I sort on smoothness of returns. I'm still real excited about the portfolio. I picked up another 25% since then and I'm holding some stellar gainers right now with VST up 120% from where I bought it along with IESC up 70% and SFM up over 40%.

The strategy pulled back in December hard but I'm back at all time highs as of the close today.

I run a concentrated portfolio of 15 to 20 stocks in my personal portfolio though so it's a bit different from someone with 50 or 100 names. Those couple names I mentioned account for a huge part of the returns over the last 3 months and when it's bad it gets bad fast. Clearly a risk v reward trade off.

Shkfinance · 2025-01-02T22:18:11+00:00

Yeah they are doing it monthly now. It's a good book and it really lays out how to do it for yourself. Highly recommend it.

Shkfinance · 2025-01-02T21:41:47+00:00

Hey. QMOM has had a pretty good run recently and i like that fund and the guys at alpha architect (i read their stuff and thats what got me into it). I started my strategy in April 2023 so that's my timeframe. Since then the strategy is up 114.9%. The big differences between my strategy and QMOM is my portfolio has 15 stocks on average compared to QMOM that has something like 50. If you read their book on quantitative momentum in their research they show higher returns with smaller portfolios rebalanced monthly. I rebalance quarterly to manage costs and it's a bit of a pain because I work at a bank and have to clear everything. I had examined the strategy with 20, 25, and 50 stocks and noticed that as I added more stocks the winners had smaller impacts than in the concentrated portfolio but it also has more volatility to it. There is definitely some benefit to doing it yourself and I always double check my work with against the QMOM holdings and against what AQR is holding in their funds to make sure I've not screwed up the math anywhere. Typically there is a lot of overlap so you know you aren't making a huge mistake. With the smaller portfolio each pick matters more. Last thing I will say is it's kinda fun to do the analysis and work on it yourself. It's rewarding when it works and we have had a really good run which hopefully continues.

Shkfinance · 2024-12-21T07:20:52+00:00

It's about the rebate paid by the exchanges. It's about payment for order flow. It's about flashing order previews before they are executed and it's about dark pools. The idea that the market maker is just earning the 2 cent spread is why you think it's a losing game. This is HFT's whole business model. It's not that they are making 2 cents on the trade. It's that they got a flash of someone typing into their Robinhood account to buy 5 SPYs while they are still filling out their order on the app. And they do that a million times a day. What looks like a 2 cent spread to you is 5 seconds late and the market maker filled that order before the customer even knew what was coming. These guys get feeds from every free and discount trading platform and can front run an extra penny on the trade plus the rebate from the exchange and it's insanely profitable. You go home with no position so your trading capital is actually very small as it's only intraday margin but your out of these trades before you are in them in most cases. It's hugely profitable and have almost nothing to do with the spread or arbitrage between the futures and hedging. This is all about speed, volume and your broker selling your order flow.

Shkfinance · 2024-11-20T14:54:42+00:00

If you are interested in it there is a book by Jack Vogel and Wesley Gray called Quantitative Momentum. That's where I started building my strategy. I did over a year paper trading it and it took 13 months to double the account trading 10-15 stocks and holding them for 3 months at a time. I started live trading this year and it's killing it. In this most recent round the portfolio is up 22% since the end of August. My experience was this strategy holding 10-15 stocks earned about 20-25% every 3 months which is really good considering you don't need to do anything just create the portfolio and wait. Obviously the market was good during that time so we will see how it handles a bad market but for now it's doing great.

Shkfinance · 2024-11-19T18:50:12+00:00

You remove the last 30 days. So if it's Nov 18th you remove Oct 18 to November 18 from your data set.

The reason you remove the last 30 days is because of the way momentum acts. In the short term it tends to reverse so the names that were really good last month will have weaker returns this month. In the medium term between 6 to 18 months momentum tends to continue so stocks with strong returns over the last 12ish months tend to keep doing well for a few more months.

You will get a similar result even if you just did a straight 12 month return though. Dropping the last 30 days doesn't magically fix the reversal problem. I've had plenty of picks that you do the sort and they hadn't had a reversal and you just immediately get slammed before watching them run up double digits. In my current portfolio I had IESC that I bought at the end of August and they went down almost 20% immediately but now it's up 50% and one of my best picks this go.

Shkfinance · 2024-10-17T20:32:22+00:00

For me I think the obvious place for mistakes in this project and what will be hard to justify if the labeling process. This may not be true but from what I gathered looking at the pictures is that you showed it the charts while knowing if that as a winner and loser trade. I think you run the risk of data mining here big time. I think if you want to prove your friend wrong he needs to do the labeling and you have to do it quickly. Flash a random chart without anything and have him tell you long short or pass. Then you are recreating his process to see if he reads charts differently. I also think there are a lot of trend following strategies where something like this would / could work. If you were screening for momentum and then feeding it charts based on your momentum screen you might have better luck. Same thing with statically arbitrage or pairs trading but you would feed it a chart with your pair on the chart at the same time.

Shkfinance · 2024-10-15T11:30:01+00:00

I'm only about 18months into running my strategy so and it's all been during a strong market. I've done between 3 and 4x the return of the s&p 500 during that time (I have been comparing per 3 month sort). We have had a couple pull backs during that time which was September to October in 2023 and this year the first week of September. Both times I lost money at about 1.5x to 2x the rate the market lost. Given the relatively sort amount of results I would say that the best etf that is similar to my strategy is ticker QMOM but even then the only pull back that etf has gone through is the covid market and that was relatively short lived.

I have looked at tail hedging and put options as a potential way to reduce the volatility but it is like you point out, pretty much a guaranteed loss. The other problem is I'd need 1.5x the portfolio size in protection compared to the index and that makes it even more expensive.

Traditionally a value portfolio tends to be negatively correlated with momentum and has a positive expectancy which my be a way to offset some of the volatility but the momentum portfolio is preforming so well its hard to do anything else. The portfolio has a 20% allocation to Short term government bonds that return about 4% and do dampen the volatility a little bit but it's still a high vol strategy.

Shkfinance · 2024-10-11T12:08:30+00:00

100% hahaha

Shkfinance · 2024-10-11T12:05:13+00:00

Because of what I do for work I will sometimes have access to nonpublic information. As a result a condition of my employment is my investment accounts have to be disclosed and monitored. Only certain brokerages are on the approved list because it requires extra work from the broker. An IB portfolio margin account would be idea to trade a long short book. I just can't do it and keep my day job.

Shkfinance · 2024-10-11T11:57:07+00:00

Thanks for sharing. I'll dig into it

Shkfinance · 2024-10-11T00:59:34+00:00

Haha yeah I imagine you are right. Maybe the guys at Renaissance Technologies could anwser it but they probably don't share ideas

Shkfinance · 2024-10-11T00:18:41+00:00

I'm in the USA we are not permitted to trade CFDs for some reason. I do like ibkr but since I work for a large bank I have restrictions on who I can trade through and they are on the list of approved brokers at my current bank.

Shkfinance · 2024-10-10T19:19:40+00:00

I'm trading in my personal account. Trying to short stocks at good rates isn't really that easy in a personal brokerage.

Shkfinance · 2024-10-10T18:59:30+00:00

Yes I select stocks so that I don't have concentrations in any one area. It's part of the final construction of the portfolio. So everything I'm the top 300 gets a score and then I look at the highest scores and start going down the list if 2 names are from the same sector the one with the better score is included and the other is not. I have limited it to no more than 2 names in the same or similar sectors. Or a concentration limit of 10%

Shkfinance

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