Weight By Positive Momentum

A practical guide to ETF trading systems

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AFJ Garner
Roundtable Knight
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Joined: Fri Apr 25, 2003 3:33 pm
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Weight By Positive Momentum

Post by AFJ Garner »

Weights Positions by Positive Momentum

Those who do not own Trading Blox can test this system using a free on-line demonstration. Go to https://virtual.tradingblox.net/ and enter “ETFDemo” as the license name and key.

This system is similar to all other Periodic Rebalance Systems with the exception of the weighting.

I won't repeat myself as regards most of the parameters except for Lookback Days. This is merely the lookback period in days for the momentum calculation.

Each rebalance date the system calculates the momentum of each stock or ETF in the Portfolio where positive momentum is achieved over the lookback period. No allocation is made for stocks which have declined over the look back period. All stocks which have increased are weighted in accordance with the return they have achieved over the period. The returns of each stock are added and then each individual return is divided by the total so that the total weighting in the portfolio amounts to 1 - IE the trading capital 100% invested.

Higher achieving stocks are thus overweighted compared to stocks which have achieved lower returns.

The weighting is adjusted on each periodic rebalancing date.

Simple stuff but educative and valuable nonetheless. At some stage I will produce a suite which enables allocation to each, all or any of these different weighting systems.
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