S&P 500 Momentum Strategy – As Simple As It Gets (Rules, Setup and Backtest Results)

Momentum trading is the opposite of buying low and selling high: momentum is about buying strength. In this post we explain if we can make a successful momentum strategy for S&P 500. We use monthly bars and a simple moving average strategy crossover system.

We backtest the following trading rules:

* When the close of the current month crosses above the 12-month simple moving average, we go long.

* When the close of the current month crosses below the 12-month simple moving average, we sell (and stay in cash until we get a buy signal).

Let’s backtest the strategy and evaluate the trading statistics and results. We used the cash index since 1960 for the backtest, and thus dividends are not considered, meaning the returns are understated, but that doesn’t alter the findings. We are interested in the relative performance between the strategy and the index; therefore, it should not matter.

Below is shown the equity curve.

We explain he performance metrics of the S&P 500 Momentum Strategy and different factors that can impact the result here >>

https://www.quantifiedstrategies.com/sp-500-momentum-strategy/