Time Series Momentum 252 (Momentum)
Moskowitz–Ooi–Pedersen time-series momentum: long while the trailing 252-bar (12-month) return is positive; exits when it turns negative.
How It Works
- Measure the trailing 252-bar (12-month) return — the classic academic time-series momentum window.
- Stay long while that return is positive.
- Exit when it turns negative, and stay out until it recovers.
Worked example. Price is 130 today versus 100 a year of bars ago — a +30% trailing return, so the strategy is long. Only when the 12-month return flips negative does it step aside.
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.