Update: Stocks on the Move August 2018
Rules-Based Strategy Update: Stocks on the Move August 2018
The Stocks on the Move strategy is based on the book by Andreas Clenow, aptly titled Stocks on the Move. It is a momentum based system that calculates the statistical slope and regression for all the stocks in the S&P 500. The top momentum stocks are held and replaced each week depending on the rules of the system.
If trading true to the book, I would be re-running the calculations each week and replacing the stocks that move off the list with new momentum stocks. However, selfishly to manage my own time tracking the portfolio, I be adapting the strategy with the following changes:
- I trade the system once per month, on the first trading day of the month.
- I am going to use a risk parity value of 0.006. This will increase the risk substantially, but will also be easier to manage for the purposes of tracking this portfolio (i.e. less positions to manage).
- I do not do the position rebalancing as recommended in the book. The portfolio is rebalanced monthly when it comes time to buy and sell S&P 500 stocks.
These changes do alter the method in the book so please keep that in mind. It will be interesting to see how the system performs related to that. My guess is I will see bigger drawdowns, but overall the momentum effect will level out over time.
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Stocks on the Move Rules-Based Investing
As a reminder, this portfolio trades based on specific rules that tell the investor what stocks in the S&P 500 to buy and when. Here are the rules of the strategy (but keep in mind the tweaks of how I manage the portfolio as per above).
- Determine Market Trend. Buy only if S&P500 is trading above 200 day moving average.
- Calculate momentum scores for each of the stocks in the S&P500.
- Disqualify any stocks that are trading below their 100 day simple moving average.
- Disqualify any stocks that have gapped up or down 15% in the past 90 days.
- Build initial portfolio with the strongest trending momentum stocks in the S&P500 using position sizing method.
- Rebalance portfolio weekly by recalculating momentum and sell any stock that has moved below its 100 day moving average, is no longer in the top 100 momentum stocks, had a 15% gap up or down, or has left the S&P 500. Replace those stocks with next highest momentum stock.
- Rebalance positions bi-weekly to correct position sizing amounts
This system does take some work to calculate the statistics required to rank the stocks. I have been able to replicate that in TC2000 so the calculations are done automatically for me (including position sizing).
Monthly Signals: Stocks on the Move Investing
Each month I generate the signals for the portfolio using TC2000. If you want to give TC2000 a try in order to generate the signals for the strategies on Robotic Investing, then use this link for $25 off.
This was the first month I set up the portfolio, so all positions are new.
One of the rules is that the S&P 500 must be trading above its 200 day moving average in order to make any buys. The S&P 500 is above that level so the system is free to trade.
Using TC2000 to do the stock ranking, here are the results for August 2018. You can see I have flagged any stocks with a 15% gap as well as any stocks that are trading below their 100 day moving average.
Strategy Tracking & Performance: Stocks on the Move Investing
Here is the portfolio tracker and performance chart for Stocks on the Move. I use the Morningstar Portfolio Tracker to track all the systems at Robotic Investing. As you can see the strategy lagged the S&P500 a bit over the month, but let’s give it more time to see how it really does.
Each of the portfolios tracked use a hypothetical $50,000 starting value. This portfolio was started on August 1st, 2018.
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