A Simple Momentum Trading Strategy (Backed By Data)

Hey, hey. What's up, my friend? So, in

today's training, you will learn a

momentum trading system that has

generated 535%

over the last 19 years. You might be

wondering, so Raina, what's the annual

return, man? Well, let me break it down

for you. The annual return of this

trading system is about 10% a year with

a maximum draw down of 22%. To put

things in perspective, the S&P 500, if

you buy and hold it over the last 20

years or so, annual return is about 8 to

10% a year with a maximum draw down of

55%

or even more depending how far back you

look. So, you can see that this system

has a similar risk profile as a buy and

hold approach, but with much lower risk.

And the best part about this trading

system is that it takes you only 5

minutes a month. So you have the freedom

to do the things you love. This can be

like your retirement trading system. And

this is as close as a passive income as

you can get because it only requires 5

minutes per month. So if you're

interested, then today's training is for

you because I'll walk you through the

concept behind the system, the exact

trading rules, the entry, the exits,

chart examples, and much more. Sounds

good? Then let's get started. So what is

momentum trading? So momentum trading is

a strategy that goes long on market that

have shown

the best momentum the strongest momentum

and the way we define momentum is very

simple. It's kind of like imagine like

acceleration how how fast did something

move over a given time period. So for

trading we're looking at how many

percent increase did the market did the

asset price move over a given period

could be over 2 months 6 months 12

months etc. And the reason why we are

looking for markets that have shown

strong momentum is because

it is likely to continue higher.

So the concepts behind this strategy is

to identify markets that exhibit strong

momentum. I'll share with you shortly

how we define momentum and we're going

to hold the position till momentum

stalls or show signs of weakness. So

let's have a look at this trading

system. It's pretty pretty unique and

something that you might not have you

know come across before. So this system

we will be trading the ETFs market

exchange traded advance ETFs market. And

the reason we do this is because I just

want to give you a different flavor,

exposure to the different types of

trading systems out there. Can momentum

trading be applied to the stock markets?

Yes, I could go down that direction, but

for this video, I figured, you know,

let's let's do something different. We

we'll trade ETFs instead. And again,

these ETFs are readily readily

available. You can easily find them

through these different tickers over

here. Like we are trading gold, the

ticker is GLD. We are trading S&P 500.

The ticker is SPY. Then we have TLT,

which is the Treasury bond, and DBC,

which is the commodities market. The

time frame is monthly. How often do you

come across a trading system that trades

once per month? And the beauty about

this system is you only need 10 minutes

a month and that's it. And you will have

a system that has consistently beat the

market. So, I'll get to that shortly.

And for risk management, 50% of your

capital for each My bad. This one

shouldn't be stock. This one should be

ETFs. for each ETF and a maximum of two

positions. I think you're probably

familiar with what this means by now

because I covered that in the previous

system. If you are struggling with

struggling with what it means, then just

go back and recap. And because I'm a

little bit of OCD, I'm going to change

this right now for each ETF. Okay.

So, let's have the have a look at the

rules of this trading system. The rules

of the trading system is really simple

as you can see over here. Just three

lines over here.

First one, the ETF is above the 200 day

moving average. Why do we do this? Think

about this. I'll give you three seconds.

One to three. The reason is simple. We

want to buy or go long on markets that

are in an uptrend. So markets that are

in an uptrend and they have shown the

stronger signs of the strongest

momentum. We want to buy those markets.

But first, we want to make sure that

it's in an uptrend. And we do it by

making sure that it's above the 200 day

moving average. Second one, for the ETFs

above the 200 day moving average, next

thing we're going to do is to rank them

according to their rate of change.

Simply put, right, we want to rank them

based on their price performance over

the last 12 months. So let's say let's

keep it keep it simple. Let's say 1 2 3

4. Let's say ETF 1, ETF 2, ETF 3, ETF 4.

Let's say ETF 1 over the last 12 months,

it went up 1%. ETF 2 went up 2%. ETF 3

went up 10% and then ETF 4 let's say

dropped 5%.

Now ask yourself which among these four

ETFs which are the two best performing

one assuming that they all above the 200

day moving average. I'll give you 5

seconds. 1 2 3 4 5. Okay. The answer is

this one and this one because they has

they have the largest price increase

over the last 12 months. And if you're

wondering how do I have that shown on

the chart, you know, Raina, can you show

me which indicator do I use? What is a

rate of change? Don't worry, I'll get to

that really shortly. And finally, the

last one is is just to go long the top

two strongest ETFs, which is what I've

just explained shortly. I mean,

previously. Okay. Now, let me walk you

through how to go about finding or

rather identifying this system, right,

using trading view charts. So first

thing that we want to do is to remember

we are trading these four markets gold,

SMB, bonds and commodities. So what you

can do is that if you want to trade this

system, you can create

a new watch list if you want. Let's see

how do we create a new watch list. Okay,

over here I would then let's say

create a new list. Let's call this

ETFs. Okay.

And in ETFs, let's add in the four

tickers that I've shared with you

earlier. GLD is one, SPY is the other,

the other one it's DBC, which is the

commodities, and we have TLD, which is

bonds. Okay, we have all four ETFs. So

now this is done on the I think I forgot

to mention on the first trading day of

each month. So right now, as I'm

shooting this video, it's like the 10th

of July. So you should always do this or

rather preferably do this on a fixed

trading day of each month and for the

rules of the system I shared with you

the back test was done on the first

trading day of each month. So the first

trading let's assume that you know

whatever you're seeing now is the first

trading day of each month. Okay, assume

that this is the first trading day of

July. So how do you know which ETF to

buy among this four over here? So if you

remember the rules

number one has to be above the 200 day

moving average. So, let's get out get

out the popular moving average

indicator. I'll change this to 200 day

moving average.

Okay,

there you have it. Okay, so we have

number one, GLD is above it, SPY is

above it, commodities is above it, and

bonds is below it. So, we know that

bonds is out already. So, we just left

three contenders, gold, S&P 500 and

commodities. So among these three, which

two should we be buying for this month?

So this is where we need to bring out

our rate of change indicator. Just look

for ROC or rate of change. Click on

this. And this one I'm going to change

this to

12. Okay. And if you remember, this is a

monthly time frame. We are looking for

over the last 12 months, which is which

ETF has increased the most in price over

the last 12 months. So I'm just going to

change this to a monthly time frame. And

then at this point I am going to look at

the ROC value the rate of change value

which is over here. So I'm going to buy

the two strongest one for this month. So

in this case I can see that goal is 34.

Again you can use Excel spreadsheet or a

document just to write somewhere in case

you don't forget.

Goal is 34. Okay. You look at S&P 500 it

is 13 as shown over here. And finally,

if you look at DBC, which is

commodities, the value is negative -1

over here. So this is a no-brainer,

right? So this means that for this

month, we need to buy two ETFs, which is

gold and spy. And this is are the two

ETFs that we should be buying for this

month if you were to trade this system.

And how much of gold and spy should you

buy? Again, very simple. We are going

with 50% position size and a maximum of

two positions. So, simply put, if let's

say you have $10,000,

you'll put $5,000 for this month in gold

and $5,000 in the S&P 500 for this one.

And that and that's it, right? This is

the trading system, the exact trading

rules. And this is why I said that you

can trade this system in less than 10

minutes per month. Now, let's have a

look at the results of this of this

trading system and see how he has fed

since 2016. Oh yeah, one thing before I

get to the results, I also need to talk

about the system.

When do you sell the system or when do

you sell the ETF? So very simple, you

only sell your ETFs

when it drop out of the ranking. So if

it stops being the, let me just go back

to the rules.

If it stop being the top two strongest

ETF, you sell it and then replace it

with the next strongest one. And of

course, you also sell it. If the ETF

goes below the 200 day moving average,

you would sell it as well. But let's

say, for example, gold and the S&P over

the last few months, it has been very

strong. So if you trade this system, you

realize that for the past, I would say

six months or so, there's no trades at

all because you're just consistently

holding gold and the S&P because when

you keep rolling or rather you keep

scanning or running the system each

month, you realize the positions is the

same. You're still going to be holding

S&P and gold. Let's say next month come

August and you do what I've just shared

with you, realize that S&P and gold is

the ones that you you should be holding

for the month as well. But if you're

already holding it, then there's no

reason to sell. just continue holding it

and if that's the case you'll probably

be done in like what less than 5 minutes

for the month. Okay, so this is a

monthly trading system. Don't forget

that. And now if you look at the rules

or rather the results you can see this

is the equity curve of this trading

system. And if we drill it down deeper

you can see that since 2006

in case you're wondering why do we run

this back test since 2006 is because

some of these ETFs they are not

available before 2006. So the earliest I

could start is 2006 which is not bad

because it's before the

2008 financial crisis. So you have the

chance to you know test this system on

multiple crisis like the 0809 financial

crisis, Russia, Ukraine war, COVID etc.

And for this system 2006 is up 15%. 2024

the most recent year up 26%. And we have

a few losing years in between like in

2011 and this one is it is it 2015 and

here as well and here as well. The

losing years are pretty shallow if you

ask me. It's just singledigit

losses. And later on, I'll share with

you a a trading a trading hack, a

trading tip that I think most retail

traders do not know on how you can

actually reduce the number of losing

years to just a handful, right? I will

share with you that technique later on.

So, this is the results. And if you

break it down even deeper, you can see

that since 2016, it's up about 535%.

annualized basis is about 10% a year on

average. Winning rate is close to 60%,

losing rate is about 40%, your payoff

ratio is 1.13. So this means that your

average winners is slightly larger than

your average losses losers and maximum

draw down is 22%. Again we talked about

what is draw down earlier. So again go

back and watch the video if you missed

this part.

And to conclude this trading system, the

pros and cons for momentum trading and

in particular this ETF trading system, I

won't say this is not a pros and cons

for momentum trading in general because

momentum trading can be applied to

stocks and clearly the pros and cons

will change accordingly. But for this

system, the ETF one that I just shared

with you, the monthly trading system,

number one is that minimal time

required. 5 to 10 minutes per month,

it's all you need to trade this system.

And in fact, I share with you step by

step how to actually execute it earlier.

There's little correlation to the stock

market because even if the stock market

is down, it's bearish, you could still

be making money for the year. As you've

seen earlier, you see the results

earlier, let's say we have 2008

financial crisis, this system is up 15%.

2020 with COVID, we are up 18%, 2022

with the Russia Ukraine war, in this

case we're down 3%. So there's little

correlation to the stock market and the

reason being is that even if the stock

market

declines or is in a bare market this

system can go into safe haven assets

like bonds or gold which let's say when

the overall stock market is

underperforming other assets if they are

performing the system will switch to

those assets that are performing during

those crisis period during those

recessionary period and that's how this

system can still make money even though

the stock market the stock market is

bearish.

And the downside to this system, I I

tried to think about it that but really

the downside could be there's really

nothing much to do to do for traders.

One more action you won't get much

action from this system. And another

thing that I added previously but I

removed is that this system is I would

say the returns are kind of like

average. I mean it's not like

mouthwatering wow 20 30% a year. It's

about 10% a year annual returns. pretty

average if you ask me but again this is

it's not 10% for all types of systems

under momentum trading because if you

apply momentum trading to the stock

markets your returns is going to be

higher so this why I didn't put the

returns average over here because I

didn't want you to think that momentum

trading strategy the returns are only

average so I removed that portion out

but for ETF this ETF systems right I

would say that yeah this the returns for

this system is kind of average but you

have to bear in mind even though the

returns is about 10% a year not super

wow the maximum draw down is pretty low.

It's it's only 22%.

So if you think about it, since 2016, I

believe the S&P 500 have much deeper

draw down than 22%.

So again, right, we whenever we look at

returns, we always have to look at it

returns relative to the risk that comes

along with it. Okay. Now, before you go,

I'd like you to get access to this free

training. You can get it at

tradingwithra.com/go

or in the description or in the comment

section below this video. So in this

training you will discover three

rule-based trading strategies that work

and they're all backed by data. In fact

the strategy that you've just learned is

actually taken from this training. So

you will learn in other words two more

extra trading strategies and again I'll

walk you through the

trading rules, the entries, the exits,

the risk management and chart examples

so you can quickly understand the

concepts of these strategies. And that's

not all because I would also like to

give you the PDF slides of this

training, the trading strategies cheat

sheets so you can quickly recap the

rules of this different trading system

and the back test report of all these

different trading systems. So you can

see the winning rate, the losing rate,

what is the payoff ratio, etc. All the

back test report given to you in this

training for free. So everything is free

over here. Just go down to

tradingwithfraina.com/go

or I'll put the link somewhere in the

description below or in the comment

section below. Just click on it. You'll

come to this page and you can get

started immediately. So with that said,

I wish you good luck, good trading. I

will talk to you