Skip Month Momentum (Momentum)
Jegadeesh–Titman 12-1 momentum: long while the trailing 252-bar return, measured up to 21 bars ago to skip the short-term reversal, is positive; exits when it turns negative.
How It Works
- Measure the trailing 252-bar (12-month) return, but end the measurement 21 bars (one month) ago — the most recent month is skipped because it statistically tends to reverse.
- Stay long while that skip-month return is positive.
- Exit when it turns negative, and stay out until it is positive again.
Worked example. Price 21 bars ago was 115 and 252 bars ago it was 100 — a +15% formation return, so stay long. If a bear phase later drags that measure below zero, the position is closed until the trend reads positive again.
The Math Behind The Indicators
Everything runs on closing prices of the traded timeframe: P is a close, Pt today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.
- Trailing Return (Momentum)
- The percentage change of price versus N bars ago — the simplest possible measure of trend. Positive means price is higher than it was back then, negative means lower.
- \[M_N = \left(\dfrac{P_t}{P_{t-N}} - 1\right) \times 100\]
- Example: If price is 120 today and was 100 ninety bars ago, momentum is (120 / 100 − 1) × 100 = +20% — the market has trended up over the window.