Equity · United States · CFDs, ETFs, futures · Daily · United States Free

Combined Momentum and Counter Trend Strategy on US Equity Indexes

Academic paper

Paper linkhttp://www.anchor-capital.com/Resources/OppositesAttract.pdf

Strategy in a nutshell

The strategy combines trend-following on NASDAQ ETFs/futures with a counter-trend approach on the S&P 500. Trend signals are based on EMAs, while the counter-trend rule buys after 20-day lows. Each strategy receives 50% allocation.

Economic rationale

The counter-trend component cushions short-term reversals by entering after sharp declines, while the trend-following rule captures momentum. Together, they improve return-to-risk ratios compared to using either approach alone

Backtest performance

Annualised return12.2%

Beta-0.313

Sortino ratio0.004

Maximum drawdown-11.5%

Win rate47%

Full Python code

1from AlgorithmImports import *
2class MomentumandCountertrend(QCAlgorithm):
3def Initialize(self):
4self.SetStartDate(2000, 1, 1)
5self.SetCash(100000)
6self.SetWarmUp(150)
7
8self.spy = self.AddEquity("SPY", Resolution.Daily).Symbol
9self.qqq = self.AddEquity("QQQ", Resolution.Daily).Symbol
10
11self.qqq_short_ema = self.EMA("QQQ", 50, Resolution.Daily)
12self.qqq_long_ema = self.EMA("QQQ", 150, Resolution.Daily)
13
14self.low_history_period = 20
15self.spy_low_history = RollingWindow[float](self.low_history_period)
16
17def OnData(self, data):
18if self.IsWarmingUp: return
19
20# QQQ trend-following strategy
21if self.qqq_short_ema.IsReady and self.qqq_long_ema.IsReady:
22    if self.qqq in data.Bars:
23        qqq_close = data.Bars[self.qqq].Close
24        
25        short_ema = self.qqq_short_ema.Current.Value
26        long_ema = self.qqq_long_ema.Current.Value
27
28        if (short_ema > long_ema) and (qqq_close > short_ema) and (qqq_close > long_ema):
29            self.SetHoldings(self.qqq, 1/2)
30        elif (short_ema < long_ema) and (qqq_close < short_ema) and (qqq_close < long_ema):
31            self.SetHoldings(self.qqq, -1/2)
32# SPY counter-trend strategy
33if self.spy in data.Bars:
34    spy_low = data.Bars[self.spy].Low
35    self.spy_low_history.Add(spy_low)
36    if self.spy_low_history.IsReady:
37        history_low = min([x for x in self.spy_low_history])  # low of the 20 most recent days
38        
39        if history_low == spy_low:
40            self.SetHoldings(self.spy, 1/2)
41        else:
42            self.SetHoldings(self.spy, -1/2)