Backtest a Magnificent 7 momentum rotation
The Magnificent 7 — AAPL, MSFT, GOOGL, AMZN, META, NVDA, TSLA — drove the S&P 500's returns for most of the last five years. A momentum rotation strategy holds the top 2-3 names each month based on trailing 6-month return and rebalances monthly. Run it free, see whether 'just hold the Mag 7' would have beaten or underperformed the rotation logic.
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How the strategy works
Each month, the strategy ranks the seven names by trailing 6-month total return and holds the top three with equal weights. On rebalance day (first trading day of the month), positions are adjusted. Transaction costs of 10bps + 5bps slippage are subtracted. The benchmark is QQQ.
The thesis: momentum is one of the most robust empirical factors in equity returns. The Mag 7 are large enough to be tradable, concentrated enough to create cross-sectional dispersion, and recent enough that the regime is still relevant. The risk: when one of the seven crashes (META in 2022, TSLA in 2022), the rotation logic stays in for a month and amplifies the drawdown vs an equal-weight basket.
How to run this on Livermore
- 1
Open the template
Click 'Run free' below to open this template in the Livermore workspace.
- 2
Choose a ticker
Default universe: AAPL, MSFT, GOOGL, AMZN, META, NVDA, TSLA. Swap to any S&P 500 ticker for free.
- 3
Click Run
The backtest runs on real Alpha Vantage price data and shows results in seconds.
Reading the results
Look at the equity curve relative to QQQ. If the strategy beat QQQ by 5-15% over the window with comparable drawdown, momentum is paying off. If it matched QQQ but had bigger drawdowns, you're paying for momentum without getting the alpha — try an equal-weight Mag 7 basket instead.
FAQ
What is momentum rotation?
A strategy that ranks a basket of assets by recent return and holds only the top performers. The hypothesis (well-documented in academic research) is that recent winners tend to keep winning over horizons of 3-12 months.
Why 6 months of trailing return, not 1 or 12?
Academic research (Jegadeesh + Titman, 1993; Asness et al., 2013) finds the 6-12 month window most robust. 1-month return is mean-reverting (short-term reversal). 12-month return loses sensitivity to regime changes. 6 months is a defensible compromise.
Can I add other tickers to the rotation?
Yes — sign up free, open the strategy in the workspace, and add tickers to the universe. The Scout tier supports up to 5-ticker custom universes; Strategist unlocks 25.
Ready to run it?
Free to try. No credit card. Real market data.
Run this strategy free