Momentum Investing

Introduction

Introduction — What is Momentum?

  • % Away from 52 Week High
  • RSI — Relative Strength Index
  • Trading Volumes
Chart of Lux Industries (NSE: LUX)
  • RSPM
  • Absolute Returns
Chart of Tata Power (NSE)
  • Sharpe Ratio
  • Price Momentum Ranking
  • Number of days to next earnings call

Stock Universe — NIFTY Midcap and Smallcap

Datavendor — Tickertape Pro

Tickertape Screener

Ticket size, Exit strategy and Risk Management

Results: Returns, Drawdowns and Peer Performance

1 Year chart of weekly returns of momentum fund vs various indices
Drawdowns (in red) vs Returns (in green)
Comparison of this portfolio (in green) against popular momentum funds in India

Other Important Statistics

What’s next, for this portfolio?

  • Completely automate the model to collect data on daily level — Currently, the data is on a weekly level for the fund performance. That’s because to a certain degree some of the logging is still manual. I wish to automate this model completely using Selenium (python package) and collect data on a daily basis to understand the volatility and risk of this strategy.
  • Replicate this model for US Small Caps and Mid Caps (already live). On 21st January, 2022 — I deployed this model on US stocks in the S&P400 Midcap and S&P600 Small cap indices. It’s a 5 times wider universe of stocks to select from than the previous one (1000 against 200), but so far I’m again impressed with the model’s performance despite markets being extremely volatile at this time (Fed rate hikes speculations, Russia’s invasion of Ukraine, High inflation). I shall be posting a similar update in 2023.
  • Record more data on cash % in the portfolio, response to change in VIX, number of entries and exits. I have recently started logging on how this model responds to different phases of the market and increased volatility. I’m logging what percent of the portfolio goes into cash when there’s spiked volatility and how many trades it is suggesting to me during such times.
  • I’m exploring the idea of algorithmic trading to make it a fully automated model, but I’m still very skeptical about it. I wish to generate a parallel back-test model in the coming months which would trade automatically and compare its returns with my model over the same time period.

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Shreyas Padhye

Shreyas Padhye

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