patrick.net

Ok, normally, I don't talk about momentum investing vis-a-vis rotation, but this is something worth considering, esp if you have some disk/cloud storage & computing interest.

I know a trader who's created a pseudo-automated system using the following principles ...

1) First, the system has ALL the trading data on ALL the ETFs out there. The ETFs which are excluded are short funds & leveraged funds.

2) Then, they're screened on their 200 day exponential moving average (EMA). Any ETF below it is excluded.

3) The 3 month rate of price change is compared to the 6 month rate & the latter should always be greater, indicating greater momentum.

4) And finally, the ETFs are screened on their sectors. In other words, not all of them should be in Gold, Software, or Biotech.

5) The remaining ETFs are put into either a portfolio or 5 or 10.

6) At the start of the month, the basket of ETFs is purchased in even amounts.

7) At the end of the month, they're sold and the process repeats itself.

The stop loss here is the Russell 2000 making a 6 month low or that the 66 day EMA is touched. I used the Russ to exit my Bitcoin ETF & it looked like it worked, as leading indicator.