Using a 12-Month Return Crossover for Absolute Momentum Signals

Summary

This strategy calculates approximately one year of price return and compares it with a moving average of that return. Its lookback adapts to chart frequency: the script uses 252 bars for daily data, 52 for weekly, 12 for monthly, and estimates the number of bars in a year for other intervals. The return is plotted as a histogram, while its moving average serves as the signal benchmark; the default average length is 12 periods.

A crossover above the return average opens a long position. A cross below either opens a short or closes a long and moves to cash, depending on the shorting setting. Orders default to 100% of equity, and the script can be backtested as a strategy. The document frames this as a simplified absolute-momentum implementation inspired by dual momentum investing, with a trend filter intended to moderate downside. It provides no actual performance results. The automatic lookback is an approximation on nonstandard timeframes, and the description does not test the method across markets or account for trading costs.

Key ideas

• The signal is a price return over an approximately one-year lookback, adapted to the chart timeframe.
• The strategy compares that return with a simple moving average of the return.
• A cross above the average enters long, while a cross below exits to cash or enters short according to the setting.
• The default order allocation is 100% of equity.
• The document presents an educational, backtestable implementation but reports no performance results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.