Stock momentum

Checked October 2026

Stock momentum buys the stocks that rose the most over the past six months and shorts the ones that fell the most, then holds that book for six months. Jegadeesh and Titman published it in the Journal of Finance in 1993. Backtoast ran the six-month version. The monthly-rebalanced version failed our test, losing 5.1% a year over 10,238 trades.

Backtoast

You pay $99 for two full tests of your own strategy, and a pass is an offer of 30% of the profit Backtoast makes trading it with its own money.

Stock momentum

The paper starts a new book every month and holds each for six months, so six overlapping books are open at once, each with a sixth of the money.

The run couldn't hold overlapping books. It kept one book, rebuilt each month from the 200 strongest and 200 weakest stocks over six months, so a stock stayed only while it was still at an extreme. It ranked every US stock and fund over $5 that trades at least $1 million a day, on price alone, with shorts treated as free to borrow.

52 week high momentum ranks by distance from the yearly high instead of the six-month return.

When it works

Momentum makes its money when trends run for months, and it suffers momentum crashes when the market rebounds sharply after a fall and the stocks it's short rally hardest. Traders keep using it because the effect has turned up in stock markets around the world and in other asset classes since the 1993 paper. Trading the long side alone skips the short leg, where most of the crash losses come from, and a draft can test that before you spend a full test.

Origins

Jegadeesh and Titman tested NYSE and AMEX stocks from 1965 to 1989, and the six-month version earned about 1% a month for winners minus losers. The run is from late 2021 to October 2026.

The run is Backtoast's, from 29 October 2026, after costs.