There is a PRO version of the Emerging Monthly Mover FREE strategy. Be sure to familiarize yourself with this strategy before moving on to analyzing the PRO version.
Inspirations
Details about the Emerging Monthly Mover FREE can be found here.
The PRO version expands the capabilities of the basic version, improving most metrics, including:
Improving Return/DD from 5.26 to almost 7 in the PRO version
Winrate from 60.23% to 66.3%.
Max Open Drawdown from 20.53% to 15.82%.
The PRO strategy has exactly the same day-of-the-month conditions as the basic version, but it differs in two elements. In this article, we will show the differences in the results of both versions.
Backtest 1 - Fixed $ Money Management
In this scenario, we are investing a constant amount of $100k.
We are testing the period from 2004 to 2025.
Invested capital: $100,000
Tested period in years: 22
Tested Instrument: EEM
Equity Chart for this test:
In the table, we highlighted the moment when the strategy was published.
The average annual result was 8.25%, which, when capital is used for only 12.89% of the time, yields an annualized exposure‑adjusted return of 62.99%.
Click the button to see the latest backtest:
Backtest 2 - % Money Management
In this backtest, we invest in a strategy that constantly uses 100% of the current capital (starting with $100'000). This means that as the capital grows or decreases, the position value changes proportionally. The rest of the parameters remain unchanged.
The equity chart for this test looks as follows.
The chart includes a benchmark, which is a yellow line.
A red line on the chart is an Open Drawdown line.
Basic statistics resulting from the test:
Analysis of Trading Strategy
Net Profit and CAGR
The net profit of $457,341 in the tested strategy is lower than the Benchmark (Buy & Hold SPY marked in yellow on the chart), which is $802,020, translating to a CAGR of 8.12% vs 10.51%. This means that the tested strategy achieved a lower net profit and slightly lower average annual return.
Drawdown and Return/Drawdown Ratio
The maximum open drawdown in the analyzed strategy was 15.25% vs 55.19% in the benchmark, while the benchmark’s Return/Open Drawdown ratio is 5.33. This confirms that the analyzed strategy remained less risky and more stable than the benchmark, offering a clearly better risk‑adjusted profile.
Exposure
The exposure was just about 13% compared to 100% in the benchmark. This low exposure is a key advantage of the PRO strategy. You can learn more about how exposure is measured in this dedicated study.
Winning Percent
The winning percentage was 66.3%. This high rate of profitable trades offers significant psychological comfort about how often profits are generated.
SL & TP
The strategy does not use typical stop loss and take profit levels, although there are no obstacles to implementing them. According to our tests, for most ETF/stock strategies, these settings worsen results. Instead, the strategy has one exit signal or an additional safety exit after X bars (time-based stop loss). Diversification within the portfolio of various strategies serves as protection against the strong impact of a potential price change in a single stock on the entire portfolio.
Visit the stop loss order page.
Market Regime
The strategy was tested in all basic market regimes and includes filters implemented based on this. Read more about market regimes.
Trading Costs
Trading costs and slippage were included in the backtests. You can view our latest research on trading costs with Alpaca Broker here. In a diversified portfolio of stocks and strategies, transaction costs can impact your profit or loss. Therefore, take the time to thoroughly test and select a broker.
Robustness
The number of historical transactions, 187, is significantly lower than Stockpicker-type strategies, which can provide even over 100'000 transactions in robustness tests.
The strategy has a few rules: generally two entry rules and one exit rule. We believe that fewer parameters make a strategy more robust. So, we aim to keep our strategies simple, using only parameters that significantly impact effectiveness and align with the strategy's nature.
Recommended Instruments
The recommended primary instrument for this strategy in Algocloud is EEM; however, also good results can be achieved, e.g. in VWO.
Pattern Day Trader
The strategy does not close transactions on the same day, so it does not meet the Pattern Day Trader (PDT) criteria. This means that a real account is not required for the entire portfolio of at least $25k.
Correlation
Checking correlations helps avoid duplicative risk in a portfolio and better integrate systems with different profiles. You can find more about correlation here.
Summary & Strengths and Weaknesses
Let's compare the PRO version vs. FREE (MM%):
The PRO strategy achieved a lower total monetary result by $85k, yet we rate it higher because it offers:
a higher Winrate (almost 68% vs 61.6%)
a lower drawdown and a higher Return/DD ratio
half the exposure, i.e. 13% instead of 21%. This allows the same capital to be used at the end of the month for other strategies.
Strengths of the PRO strategy:
Very low capital commitment, allowing easy combination with other portfolio strategies.
Favorable balance between growth and risk across the tested period.
Relatively mild drawdowns compared to the benchmark, resulting in a more stable equity curve.
High proportion of profitable trades, supporting psychological comfort.
Multi-day holding periods naturally avoid same-day trading and help stay clear of PDT restrictions.
Weaknesses of the strategy:
Lower trading frequency than high-frequency systems, resulting in less standalone statistical robustness.
Best used as part of a diversified portfolio, not as a sole all-in approach.
Summary
Emerging Markets can experience much stronger growth than the US market in certain periods. Therefore, it is worth having exposure to these markets as well. As shown, holding this ETF for the entire month is not effective. By using capital for only 10-20% of the time (depending on the strategy), very good results can be achieved without exposing oneself to large fluctuations.
I personally use the PRO strategy in my portfolio every month, but the decision on whether to use it is up to you!
What you receive in the package for this strategy:
The eBook presents detailed rules and results for the strategy.
The SQX file is ready to be used on the Algocloud and StrategyQuant platforms.
Pseudocode that describes all the rules in an easy-to-understand way.
Disclaimer
The results obtained from historical data do not guarantee future outcomes. The effectiveness of a strategy can change over time. Backtesting is a tool that allows for the analysis and evaluation of an investment strategy based on historical data. Various factors, such as market changes or economic conditions, can influence the effectiveness of a strategy over time.
Investing always involves risk. This material is not investment advice. We share our experience and algorithms for educational purposes. We make efforts to ensure that our algorithms are error-free, but neither we nor the tools we use guarantee the absence of technical issues. Any decisions to use a particular strategy are made at your own risk and should be preceded by careful understanding and verification. You should always carefully consider your investment goals and risk tolerance before making investment decisions.
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