Our Methodology

Trendrating dedicated five years to building and testing our master model

Objective

  • Capture trends lasting from a few months to a few years
  • Filter out market noise (volatility, false break-outs, minor refractments)
  • Effective in different markets and economic cycles.

Criteria

  • Massively tested 357 indicators related to momentum;
  • Universe of 20K instruments from 20 countries;
  • Minimum market cap of 100 million USD;
  • 25 years of EOD price data for in sample testing and 6 years for out of sample testing.

Output

  • Identified 8 indicators which were 58-62% reliable;
  • Combined them into a Master Model;
  • Reliability increased to 65% when 6-8 indicators were in sync;
  • Added self-adjusting model to factor in volatility;
  • Final result was a model with 71-83% accuracy.

How we compare

Trend Following Systems

Pros

  • Can identify trends quickly
  • Successfully implemented by a large following of technical analysts

Cons

  • Erratic and unreliable in volatile markets
  • Results in high turnover
  • Ineffective at the portfolio level

Legacy Momentum Models

Pros

  • Stable
  • Good track record at identifying meaningful trends

Cons

  • Based on outdated academic methods
  • Require 6+ months to engage in a trend
  • Late in capturing trend reversals