All trading involves risk. Losses can exceed deposits.

Monthly momentum strategy

We look at the shares with the highest percentage return over the past two months as part of a potential trading strategy.

All trading involves risk. Losses can exceed deposits.

We have looked at momentum trading on a weekly basis, but now we’ll take a longer-term view of the methodology.

The strategy covers all the shares in the FTSE 350, i.e. the combined FTSE 100 and 250 indices. It involves buying the six top performing companies over the previous two-month period, then closing the trades at the end of each month.

On data going back to 1986, this strategy would have provided an average return (on an unleveraged account) of 2.6% per month. No strategy can be profitable all the time, however, and this one is no exception; thus it calls for the careful use of stop losses (especially in a leveraged account).

For the past two months, the shares with the largest percentage return were as follows:

Company

% gain

Evraz 38.33%
Heritage Oil 24.12%
Investec 17.83%
Centamin 16.91%
Rank Group 16.29%
JD Sports Fashion 14.08%
AstraZeneca 14.01%
RSA Insurance Group  12.59%
Al Noor Hospitals Group 12.47%
Bank of Georgia Holdings 11.81%

 

I have included the top ten, rather than just the top six, as Heritage Oil and AstraZeneca saw large moves because of takeover news. At the end of May we will see how these ten shares have performed.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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