Weekly futures momentum
Time-series momentum is one of the most studied ideas in finance: an asset that has risen over the past year tends to keep rising, and one that has fallen tends to keep falling. This version applies it to NIFTY futures alone. Each week it checks the trailing 12-month return, skipping the latest week, and holds long or short accordingly. The number of lots scales so that the position's volatility stays near a 15% annual target.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
In this test the damage came when the market moved against the 12-month signal. The 11 positions held while NIFTY rose more than 1% lost ₹4,17,454, which fits a book that was short for much of the year as the trailing return was negative. Entries after calm evenings, with India VIX below 11.5, lost ₹5,15,040 over 13 positions without a single win: calm VIX means low realised volatility, so the volatility target sized the book up towards six lots just as the market turned. Entries on trend days lost ₹5,03,676 over 20 positions, while those on choppy days made ₹1,75,987 over 14.
About this strategy
- Build a roll-adjusted daily return series of the near-month NIFTY future.
- At 09:20 on the first session of each week, measure the return over the previous 52 completed weeks, leaving out the most recent week.
- If that return is positive, the target is long; if negative, short.
- Size the position as 2 lots × (15% ÷ realised volatility of the last 60 daily returns), rounded and kept between 0 and 6 lots.
- Adjust the book to the new target one lot at a time; a change of direction closes every lot and opens the other side. There is no stop or target.
- On futures expiry day close every lot at 15:15 and reopen the same lots in the next month.
Why traders use it
Research across many markets and decades has found that the sign of the past year's return has some power to predict the next month's, and trend-following funds are built on the idea. It needs no forecasting, only one calculation a week, and it can be long or short. Volatility targeting adds more lots in calm markets and fewer in turbulent ones, aiming for a steadier risk level than a fixed size.
The year in plain words
On NIFTY futures from 1 Oct 2025 to 30 Sep 2026 with default settings, the strategy closed 53 single-lot positions and won 36% of them, losing ₹5,02,281 before costs with a profit factor of 0.59. October lost ₹2,68,356, January ₹2,13,382 and March and April together nearly ₹4 lakh; September's ₹3,71,786 gain came too late. The drawdown reached ₹9,00,386. Most closings were monthly rolls (30) or weekly resizes (20). Weekly trading was light on costs: the after-costs loss was ₹5,09,855. One index over one year is a small test of a cross-market idea.
What the settings do
Risks
- Volatility targeting can hold up to six lots in calm markets, so a reversal from a quiet period produces large losses.
- There is no stop loss; the position changes only at the weekly rebalance.
- A single index is a narrow sample for an idea usually tested across dozens of markets.
- Losing streaks of 23 positions occurred in this test, and the drawdown approached ₹9 lakh.
Who it suits
Systematic traders interested in academic trend-following who can fund several NIFTY futures lots with margin, hold through long losing stretches, and judge the method over many years.
Questions traders ask
What is time-series momentum?
It goes long an asset whose own return over a past window, usually 12 months, is positive and short one whose return is negative. Unlike cross-sectional momentum, which ranks assets against each other, it looks only at each asset's own trend.
Is 12-month momentum profitable on NIFTY futures?
Not in this backtest. From 1 Oct 2025 to 30 Sep 2026 it lost ₹5,02,281 before costs and ₹5,09,855 after ₹20 per order and bid-ask slippage, with a drawdown of ₹9,00,386. Past results do not guarantee future ones.
What does volatility targeting do?
It sets the number of lots so the position's expected volatility stays near a target, here 15% a year. When NIFTY is calm it holds more lots, up to six; when it is turbulent it holds fewer. In this test the larger calm-period positions were the costly ones.
Why skip the most recent week?
Very short-term returns often reverse. Leaving the latest week out of the 12-month window is a common way to keep the signal focused on the longer trend.