Stock futures momentum
Momentum investing buys what has been rising over the past year on the idea that strong performers tend to keep performing for a while. This strategy applies the simplest form to a single F&O stock: on the first session of each month it checks the stock's 12-month return, and while that return is positive it holds one lot of the stock future, rolling it from month to month. When the yearly return turns negative, it goes flat.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The eight trade records are monthly slices of essentially one long holding, so no condition has enough trades to judge. The slices simply followed the market: the 3 held while NIFTY fell more than 1% lost ₹1,47,500, while the 2 held while it rose more than 1% made ₹34,950. A 12-month return measured once a month reacts very slowly, so the rule kept the position long through falls in January and March 2026 and only stepped aside in June, after the yearly return had turned negative. That delay is built into absolute momentum: it is designed to ride long trends, not to sidestep corrections inside them.
About this strategy
- On the first trading session of each month, compare the previous month's last close of the RELIANCE near-month future with its close 12 months earlier.
- If the 12-month return is above 0%, the stock qualifies.
- On the first month-start session it qualifies, buy one lot of the near-month future at 09:20.
- Keep holding while it still qualifies at each month start; there is no stop loss.
- At each monthly futures expiry, close the expiring contract and buy the next month's, so the position is carried forward.
- At 09:20 on the first month-start session the stock no longer qualifies, sell the future.
- If the stock is in the F&O ban, any new entry or roll waits for the next session.
Why traders use it
Twelve-month momentum is one of the most widely studied effects in stock markets: stocks that have risen over the past year have tended to outperform over the next few months. In India it is usually run as a portfolio of the strongest dozen or so stocks, rebalanced monthly. Using the stock future gives leverage and avoids delivery, and the monthly check keeps trading to a minimum, which appeals to positional traders who do not want daily decisions.
The year in plain words
On RELIANCE futures from 1 Oct 2025 to 30 Sep 2026, the stock qualified from November, and the long position was held and rolled each month until it was closed at the start of June, giving 8 trade records. Three slices made money and five lost, for a total loss of ₹1,13,450 before costs. January 2026 alone lost ₹84,400 and March ₹44,800, while November, February and April made ₹17,000-23,000 each. The drawdown reached ₹1,36,350. After ₹20 per order and bid-ask slippage on each roll, the loss is ₹1,18,370. One stock over one year is a single bet, not a test of momentum investing.
What the settings do
Risks
- There is no stop loss; a single futures lot of a large stock can lose lakhs of rupees in a correction, as it did here.
- Running momentum on one stock gives none of the diversification of the usual top-dozen portfolio.
- Monthly rolls add costs and can be delayed if the stock enters the F&O ban.
- Momentum can reverse sharply after a strong run, and a once-a-month check cannot react in time.
Who it suits
Positional traders who want a very low-maintenance trend rule, understand it is a single-stock version of a portfolio idea, and have margin to hold a stock-futures lot through deep drawdowns.
Questions traders ask
What is 12-month momentum?
It is the stock's percentage return over the past year. A momentum strategy buys stocks with strong positive returns over that period, expecting the trend to continue for a while, and steps aside or switches when the return weakens.
Is the momentum strategy profitable on RELIANCE futures?
In this backtest from 1 Oct 2025 to 30 Sep 2026 it lost ₹1,13,450 before costs and ₹1,18,370 after ₹20 per order and bid-ask slippage, with a ₹1,36,350 maximum drawdown before costs. One stock in one year is far too small a test, and past results do not guarantee future ones.
Why does this test only one stock?
The usual version ranks all F&O stocks by 12-month return and holds the top dozen. A single backtest here runs on one symbol, so it uses the stock's own return being positive instead of a ranking. A portfolio would need one run per stock.
Why trade the future instead of the shares?
The future gives exposure to a full lot with margin rather than full payment, and it can be held only in the F&O segment by rolling each month. The trade-off is roll costs, leverage and physical settlement risk if a roll is missed.