Trend-quality driven sector/commodity ETF rotation strategy that selects the top 3 highest-scoring ETFs from a 19-instrument universe.
This page explains the Scorpio momentum ETF rotation strategy. You'll learn about the multi-timeframe scoring system, how ETFs are ranked and selected, and how the portfolio rebalances to maintain equal-weighted positions in top performers.
The Scorpio strategy scores a universe of 19 sector and commodity ETFs using a multi-timeframe momentum scoring system. Each day, all ETFs are ranked by their composite score, and the portfolio holds the top 3 in equal-weight positions.
Each ETF receives a composite score based on two trend quality factors. The optimizer found that pure price momentum adds noise — the strategy performs best when selecting ETFs with the smoothest, most consistent uptrends.
Momentum rotation strategies carry specific risks related to concentrated sector bets and rapid regime changes.
The strategy incorporates several features to manage risk across positions.
All scoring and ranking happens at market close (Day T) and trades execute at the next day's open (Day T+1). This ensures realistic backtesting without look-ahead bias.
After market close, compute the 2-factor trend quality score for all 19 ETFs. Rank by composite score to identify the top 3 holdings.
Compare current holdings against the new top 3. Generate exit orders for positions that fell out of the top 3 and entry orders for new top 3 ETFs.
At market open, execute all generated orders. Exits first, then entries, then rebalances. Each position targets ~33% of portfolio value.
All performance figures are based on historical backtesting and are hypothetical. Past performance does not guarantee future results. The strategy is long-only but involves concentrated sector and commodity bets. The backtest assumes perfect execution at open prices with no slippage. Transaction costs are not factored into results — real-world returns will be lower. This is educational content, not investment advice.