Bold typography on a grid background spells out a rules-based momentum strategy title.

A Rules-Based Momentum Strategy

ByOddmund Groette Trading strategies

A Rules-Based Momentum Strategy is a systematic approach to responding to shifts in market leadership without relying on predictions or short-term noise.

By following a consistent process, the strategy aims to keep portfolio decisions disciplined and repeatable and to take advantage of the momentum effect in the markets.

A Rules-Based Momentum Strategy for Changing Markets

We backtested the trading rules on the following ETFs:

  • SPY: US stocks
  • GLD: Gold
  • TLT: US long-term bonds
  • DBC: Commodities

From 2004, we get the following result (monthly bars):

A line chart displays rising portfolio equity and long-term financial market growth over time.
Discover how a Rules-Based Momentum Strategy helps investors achieve consistent portfolio equity growth.

Performance

  • No. of trades: 68
  • Average gain per trade: 9%
  • Win ratio: 54%
  • Profit Factor: 4
  • Annual returns (CAGR): 11.7%
  • Exposure/time in the market: 97%
  • Risk-adjusted return: 12% (CAGR divided by time spent in the market (0.97))
  • Max drawdown: -25%

Exposure is not 100% due to rebalancing.

Trading Rules

We have the full code for this strategy for TradingView, Python, Metatrader, Ninjatrader, Tradestation, and Amibroker on our website – Platinum/Annual membership:

We made the following trading rules:

🔒 These trading rules are for members only.

Get access here

I’ve got an Msc from Heriot-Watt University, Edinburgh (1996), in addition a to a business administration degree the Norwegian School of Management (BI – 1994). Did my mandatory military service in between.

After university, I worked two years as an auditor (1996-1998).

I co-founded Aksjeforum.com in 1998/99 - one of the first websites about trading and investing in Norway. It was later acquired by Digi.no in 2001.

I have written 4 books about trading (in Norwegian). One of them has sold 30,000 copies, a record for a financial book in Norway.

From 2001 until 2018 full-time independent prop trader (Series 7 in 2001) and investor.

2018-today: Investor, writer, analyst.

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