DeployQuant3-Month Momentum Switch on VTV
Vanguard Value ETF: US large-cap value, the slower, dividend-heavier side of the market. Backtest 2021-01-04 to 2026-10-02, $10,000 starting capital, computed by the same engine that runs live DeployQuant strategies.
The 3-month momentum rule bought VTV, the Vanguard value fund, 10 times between 2021-01-04 and 2026-10-02. A $10,000 account ended at $13,747.10. That is a CAGR of 5.70%, a total return of 37.47% and a maximum drawdown of 11.77%, with a Sharpe ratio of 0.72. Buy-and-hold on VTV returned 13.44% a year, ended at $20,622.94, fell 16.81% at its worst and had a Sharpe of 1.03.
The rule enters when the 63-day return is above +5% and sells everything when it falls below 0%. It was invested 60.4% of the time. It trailed buy-and-hold in every one of the six calendar years, and its CAGR was 7.74 points lower. It also had the shallower drawdown, 11.77% against 16.81%, though the fall took longer to recover from.
Six of the 10 round trips won, a win rate of 60%. The average win was 7.16% and the average loss was -1.73%, which gives a profit factor of 6.36. One trade supplied most of the profit. The entry on 2025-07-08 ran for 450 days and returned 24.59%, and no other trade made more than 9.40%. Take that one away and the record would look very different.
The rule ranks eighth of the 12 strategies on VTV by CAGR, and VTV ranks 20th of 59 funds for the rule. The median CAGR for 3-month momentum across all 59 funds was 0%. Among the 12 broad index funds the median was 8%, and VTV, at 5.70%, sits below that. Funds like VOO and SPY returned 8.25% and 8.21%.
All figures are hypothetical. One window of 5.74 years, no fees or slippage in the headline run, one decision per day at the open, and prices adjusted for splits and dividends.
Year by year
| Year | 3-month momentum | buy & hold |
|---|---|---|
| 2021 | 6.8% | 27.6% |
| 2022 | −8.4% | −2.0% |
| 2023 | 1.4% | 9.1% |
| 2024 | 11.9% | 15.8% |
| 2025 | 8.2% | 15.1% |
| 2026 | 14.4% | 15.3% |
Six years behind buy-and-hold, and why 2022 hurt
The rule did not beat buy-and-hold in any year. The gaps were 20.8 points in 2021, 6.4 in 2022, 7.7 in 2023, 3.9 in 2024, 6.9 in 2025 and 0.9 in 2026 to date. The yearly returns were 6.8%, -8.4%, 1.4%, 11.9%, 8.2% and 14.4%, against 27.6%, -2.0%, 9.1%, 15.8%, 15.1% and 15.3% for holding the fund.
2021 is the widest gap. VTV rose through the year, and the rule did not enter until 2021-04-07, at an adjusted price of 117.05. The first three months of the monthly table are zero. The 63-day return has to be above 5% to enter, and a rule that starts without history waits for a full lookback. The first trade ran to 2021-09-13 for 5.60% and was followed by a flat trade from 2021-10-18 to 2021-12-01 at -0.03%.
2022 is the year a trend-style rule is meant to help, and here the rule lost more than the fund, -8.4% against -2.0%. The fund fell 17.08% from 2022-04-20 to 2022-09-30 as a price series and then recovered. The rule's trades in 2022 were short. It bought on 2022-03-03 at 130.09 and sold on 2022-03-09 at 127.50 for -1.99%. It bought on 2022-09-20 at 120.54 and sold on 2022-09-23 at 116.24 for -3.57%, the worst trade of the window, over 3 days. The fund's best month of the window, October 2022 at 11.61%, fell in a stretch when the rule was in cash. The rule's own record for the month is 0.
The pattern has a simple reading. A momentum rule exits after a fall and re-enters after a rise, and in 2022 the fund rose and fell over short swings. Each entry came after a short bounce and each exit came after the bounce faded. Between 2022-04 and 2022-08 the rule held cash, which kept it out of the June low, and it then entered in September just before a further drop. The 2022-11-28 entry at 131.41 ran to 2023-02-23 for -1.34%.
2023 gave 1.4% against 9.1%, with a flat 106-day trade from 2023-06-13 to 2023-09-27 returning 0.03%. 2024 was the best full calendar year for the rule at 11.9%, and the gap to buy-and-hold shrank to 3.9 points. It held a 191-day trade from 2023-12-20 for 9.40% and a 156-day trade from 2024-07-16 for 3.29%. 2025 returned 8.2% with the first six months in cash, then a position from July. 2026 returned 14.4% against 15.3%, the closest of the six years.
Month by month
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 0.0% | 0.0% | 0.0% | 2.0% | 2.8% | −1.2% | 1.0% | 2.0% | −1.2% | 1.7% | −2.9% | 2.6% |
| 2022 | −1.0% | −0.2% | −1.9% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | −3.5% | 0.0% | 1.3% | −3.2% |
| 2023 | 2.7% | −2.0% | 0.0% | 0.0% | 0.0% | 1.8% | 3.4% | −2.3% | −2.7% | 0.0% | 0.0% | 0.7% |
| 2024 | 0.9% | 3.2% | 5.1% | −3.8% | 3.0% | 0.1% | 1.6% | 2.8% | 1.5% | −1.3% | 5.4% | −6.4% |
| 2025 | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | −0.4% | 3.4% | 2.2% | −0.4% | 2.5% | 0.8% |
| 2026 | 4.5% | 3.6% | −4.7% | 5.2% | 2.4% | 3.3% | 0.9% | 2.2% | −3.4% | −0.0% | – | – |
Months in cash and the swings inside a position
Many months in the monthly table read 0, and they come in blocks: 2021-01 to 2021-03, 2022-04 to 2022-08, 2023-03 to 2023-05, and 2025-01 to 2025-06. The 2025 block is the longest. The rule was in cash from the 2024-12-19 exit until 2025-07-08, which is the period that contained the April 2025 fall and the first part of the recovery.
The fund's worst two days in the data are 2025-04-04 at -5.98% and 2025-04-03 at -3.69%, and its best day is 2025-04-09 at 6.47%. The rule avoided the first two and missed the third. The rule's 63-day return had to turn positive and cross +5% before it would buy again, and that happened in July.
The rule's best month was 2024-11 at 5.42% and its worst was 2024-12 at -6.38%. They are adjacent, and they show the shape of a late exit. The rule held through November and December of 2024, gave back more than the November gain in December, and then exited on 2024-12-19. The monthly figures for early 2026 show the same thing at smaller size: January 4.47%, February 3.63%, March -4.67%, April 5.21% and May 2.39%. The March 2026 drop is part of the rule's third drawdown, 6.17% from 2026-02-27 to 2026-03-30.
The fund's own calendar had November at 3.56%, July at 2.57%, October at 2.56%, January at 2.32% and September at -2.44% on average. The rule's September record shows -1.24% in 2021, -3.49% in 2022, -2.67% in 2023 and -3.37% in 2026 to date. Four of the six Septembers lost money for the rule. Each calendar month has five or six observations in the window, so the pattern may reflect a handful of episodes.
Every trade
3-month momentum on VTV made 10 closed round trips, an average hold of 126 days, an average winner of 7.16%, an average loser of −1.73%, a profit factor of 6.36, a longest losing streak of 3. It held a position at the close on 60.4% of trading days.
| Entry | Entry price | Exit | Exit price | Return | Days held |
|---|---|---|---|---|---|
| 2021-04-07 | $117.05 | 2021-09-13 | $123.61 | 5.6% | 159 |
| 2021-10-18 | $124.58 | 2021-12-01 | $124.54 | −0.0% | 44 |
| 2021-12-16 | $129.72 | 2022-02-15 | $129.81 | 0.1% | 61 |
| 2022-03-03 | $130.09 | 2022-03-09 | $127.50 | −2.0% | 6 |
| 2022-09-20 | $120.54 | 2022-09-23 | $116.24 | −3.6% | 3 |
| 2022-11-28 | $131.41 | 2023-02-23 | $129.65 | −1.3% | 87 |
| 2023-06-13 | $129.64 | 2023-09-27 | $129.68 | 0.0% | 106 |
| 2023-12-20 | $139.75 | 2024-06-28 | $152.88 | 9.4% | 191 |
| 2024-07-16 | $157.66 | 2024-12-19 | $162.85 | 3.3% | 156 |
| 2025-07-08 | $173.40 | 2026-10-01 | $216.03 | 24.6% | 450 |
Prices are adjusted for splits and dividends, so they sit below the quotes printed at the time. An open position is marked at the last close.
Ten trades and one that mattered
The ten trades are listed in the table above. Four lost money, two were barely positive, and four were clear winners. The best by far was the last, from 2025-07-08 at 173.40 to 2026-10-01 at 216.035, for 24.59% over 450 days, the longest hold. The next best, from 2023-12-20 at 139.75 to 2024-06-28 at 152.88, returned 9.40% over 191 days. Then came 5.60% for the first trade, 3.29% for the 2024-07-16 entry, and 0.07% for the 2021-12-16 entry.
The losers were small. The worst was -3.57%, the next -1.99% and then -1.34%. The 2021-10-18 trade returned -0.03% and the 2023-06-13 trade returned 0.03% over 106 days. The median trade returned 0.07% and the median hold was 106 days, while the average hold was 126.3 days.
The profit factor of 6.36 is high because the losses are so small, and it depends on one winner. Take the 24.59% trade out and the remaining nine trades have a much lower average win. A rule with 10 trades in 5.74 years has too small a sample to separate skill from luck, and the win count of 6 would change with a single different entry date.
The longest win streak was 4 and the longest loss streak was 3. In 2022 the rule made 3 round trips and won 1. In 2024 it made 2 and won both. In 2026 it closed 1 trade, the 450-day winner, on 2026-10-01, one day before the end of the window, so it finished in cash. The 10 round trips came from 20 fills.
The two short 2022 trades, 6 days and 3 days, are the rule's whipsaws. The buffer between the +5% entry and the 0% exit is meant to limit that, and it did not prevent these two, since both exits came within a week of entry.
Largest drawdowns
| Peak | Low point | Depth | Days to low | Recovered | Days to recover |
|---|---|---|---|---|---|
| 2021-11-15 | 2022-12-19 | −11.8% | 399 | 2024-07-31 | 590 |
| 2024-11-29 | 2025-08-01 | −7.6% | 245 | 2025-11-12 | 103 |
| 2026-02-27 | 2026-03-30 | −6.2% | 31 | 2026-04-30 | 31 |
Buy-and-hold's deepest drawdown ran from 2022-04-20 to 2022-09-30 and reached −16.8%.
Drawdowns: shallower than the fund and slower to recover
The rule's maximum drawdown was 11.77%, from a peak on 2021-11-15 to a trough on 2022-12-19, 399 days later. Recovery came on 2024-07-31, 590 days after the trough. The peak came during the 2021-10-18 trade, and the trough fell inside the 2022-11-28 trade, after the March and September trades had lost money.
The second drawdown was 7.56%, from 2024-11-29 to 2025-08-01, with recovery on 2025-11-12. It contains the December 2024 loss of 6.38% and the six months in cash. The equity curve sat flat while the fund fell and recovered, so the drawdown is the December slide and a long wait. The third was 6.17%, from 2026-02-27 to 2026-03-30, recovered on 2026-04-30.
Buy-and-hold had a drawdown of 16.81% from 2022-04-20 to 2022-09-30, with recovery on 2023-07-20, 293 days later. Its second drawdown was 14.24% from 2024-11-29 to 2025-04-08, and its third was 9.68% from 2023-07-26 to 2023-10-27. The rule's worst fall is 5.04 points shallower than the fund's, and it fell at a different time. The fund's worst stretch was April to September 2022, and the rule's worst stretch started a few months earlier, from its November 2021 peak, and ended in December 2022.
The fund as a price series fell 17.08%, and its longest drawdown lasted 312 sessions. On a 4-event list of 10% falls from a 20-day high, covering 6 days, VTV is a quiet fund. A momentum rule has little to protect against in a fund that rarely falls fast, and the shallower drawdown comes from being out of the fund, with a 60.4% exposure.
The drawdown improvement came with a lower Sharpe: 0.72 for the rule against 1.03 for buy-and-hold. Less drawdown was bought with much more lost return.
With trading costs
The headline run fills at the bar price. These runs charge slippage on every fill.
| Slippage per fill | CAGR | Max drawdown | Final value | Sharpe |
|---|---|---|---|---|
| None (headline) | 5.7% | −11.8% | $13,747 | 0.72 |
| 5 basis points | 5.5% | −12.1% | $13,636 | 0.70 |
| 10 basis points | 5.3% | −12.5% | $13,489 | 0.68 |
What 5 and 10 basis points did
At 5 basis points the CAGR was 5.55% and the ending equity $13,635.96, with a drawdown of 12.12% and a Sharpe of 0.699. At 10 basis points the CAGR was 5.35%, the equity $13,488.78, the drawdown 12.46% and the Sharpe 0.678. The headline run was 5.70% and $13,747.10.
The rule made 20 fills in 5.74 years, so it has a small cost footprint. Doubling the cost assumption moves the CAGR by a fraction of a point. The result stays well below buy-and-hold's 13.44% at both levels. The fund's average daily dollar volume was $406,579,544 and its median minute volume was 3,738 shares.
For a rule this slow, the cost runs say that friction is not the problem. The gap to buy-and-hold is a result of time in cash, which the 60.4% exposure figure reflects, and of a signal that waits for a 63-day return to turn.
Changing the parameters
| Version | CAGR | Max drawdown | Round trips | Win rate | Final value |
|---|---|---|---|---|---|
| Published rules | 5.7% | −11.8% | 10 | 60% | $13,747 |
| Enter above 0% | 4.2% | −24.4% | 35 | 46% | $12,640 |
| Enter above 10% | 5.4% | −7.8% | 5 | 80% | $13,535 |
| Enter above 15% | 5.1% | −6.2% | 4 | 75% | $13,298 |
Raising the entry threshold
The parameter table varies the entry level and leaves the exit at 0%. Entering above 0% returned 4.16% a year with a 24.40% drawdown and a Sharpe of 0.469, over 35 trades of which 16 won. Entering above 10% returned 5.41% with a 7.85% drawdown and a Sharpe of 0.842, over 5 trades with 4 wins. Entering above 15% returned 5.09% with a 6.17% drawdown and a Sharpe of 0.845, over 4 trades with 3 wins.
The default +5% entry gave 5.70% with an 11.77% drawdown and a Sharpe of 0.72. Moving to 0% made everything worse: more trades, a deeper drawdown, a lower return. With no buffer the rule flips around its threshold, and 35 trades in the window is the signature of that. Moving up to 10% and 15% gave similar returns with a much shallower drawdown and a higher Sharpe, on far fewer trades.
The higher thresholds look better on risk, and that is the result of a very small sample. Four or five trades in 5.74 years is a thin basis for a claim. The 10% and 15% variants also mostly sit in cash, and a rule that waits for a 15% run on a fund that moves 13.59% a year in volatility enters rarely.
The default is not at either extreme. The loose neighbour, entry above 0%, did worse on every measure, and the two on the strict side beat the default on drawdown and Sharpe while giving up a little CAGR. A reader choosing between them is choosing between a rule that trades more and one that trades almost never, with the same sort of return.
How VTV behaved
| Measure | VTV |
|---|---|
| Data in this test | 2021-01-04 to 2026-10-02 (1444 sessions) |
| Total return, buy and hold | 111.7% |
| Annualized volatility | 13.6% |
| Deepest drawdown | −17.1% (2022-04-20 to 2022-09-30) |
| Up days | 53.6% |
| Average daily range | 1.04% |
| Average overnight gap | 0.34% |
| Correlation to SPY | 0.86 |
| Correlation to QQQ | 0.67 |
| Correlation to TLT | 0.04 |
| Sessions above the 200-day average | 83.8% |
| Crossings of the 200-day average | 42 |
| Falls of 10% or more from a 20-day high | 4 |
Why a value fund gave momentum little to work with
VTV returned 111.73% in total, a CAGR of 13.96% as a price series, with an annualized volatility of 13.59%. It rose in five of the six calendar years and fell in 2022. The fund was above its 200-day average on 83.78% of sessions and crossed it 42 times. A fund that spends that much time above its long average and has shallow dips gives a momentum rule long periods of being right and short periods of being whipsawed.
The days are small. The average up day was 0.64% and the average down day was -0.62%, with 53.64% of days up. The first-order autocorrelation of daily returns was 0, so yesterday said nothing about today. The fund's beta to SPY was 0.71 and to QQQ 0.41, with correlations of 0.86 and 0.67. It is a US large-cap value fund, and it moves with the market at a lower amplitude.
A quarterly lookback sees a trend only after it is established, and a value fund in this window often rose in small steps. The rule's 60.4% exposure compares with the 83.78% of sessions the fund spent above its 200-day average, so the rule was invested for a smaller share of sessions than the fund spent above its long average.
Mean reversion had more to work with. RSI(14) fell below 30 on 20 sessions, with a median 20-day return afterwards of 5.34% against a baseline median of 1.67%. The RSI(2) snapback returned 7.29% with an 11.73% drawdown, and RSI mean reversion returned 6.80%.
Among the broad index funds, the same momentum rule gave VOOG 8.80%, IOO 8.43%, QQQ 8.21% and VV 7.95%, and gave VOOV 2.38%. IWM lost 1.59% and EEM lost 1.62%. VTV was in the lower half. Growth-heavy and large-cap funds suited the rule better than the value and small-cap funds in this window.
The rules
Hold while the trailing 3-month return is positive (above +5% to enter, below 0% to exit).
- WHEN the market opens · IF not invested AND the 63-day return > +5% · THEN buy with 98% of the sleeve
- WHEN the market opens · IF invested AND the 63-day return < 0% · THEN sell the whole position
Time-series momentum on a quarterly lookback, the horizon much of the academic momentum literature uses. The template enters after a +5% three-month run and exits when the same measure turns negative. The gap between entry (+5%) and exit (0%) is a buffer against flip-flopping around a single threshold.
Good for: assets with long, persistent cycles, such as index, sector and managed-futures ETFs.
Watch out: a three-month lookback is slow; V-shaped crashes and recoveries can see it exit near the bottom and re-enter well off the low.
How the rest of the library did on VTV
The rule enters at the open when the 63-day return is above +5% and exits at the open when it is below 0%, using 98% of the sleeve. The gap between the two thresholds is the rule's only protection against flip-flopping, and the 35-trade variant shows what happens without it.
On VTV the other strategies ranged widely. The monthly cycle returned 12.08% with a 15.43% drawdown, the best result, because it stays in the fund almost all the time. The weekly 7% target returned 10.69% with a 20.34% drawdown. The SMA 10/50 trend returned 7.40% with 11.60%, the EMA 12/26 trend 7.30% with 16.48% and the golden cross 5.03% with 17.80%.
3-month momentum at 5.70% sits among them, with a drawdown close to the SMA 10/50 trend's and a lower CAGR. The trend plus trailing stop returned 5.98% with a 24.37% drawdown, the deepest of the list. The 200-day regime filter returned 4.26% with 23.32%. The dip buyer returned 4.00% with a 4.37% drawdown, the shallowest, and the momentum breakout lost 0.26%.
None of them beat buy-and-hold's 13.44% a year. VTV rose steadily, and a rule that sat in cash for any part of the window gave something up. The limits are the usual ones. The rule made 10 trades, the result leans on one 450-day winner, the headline run has no costs, and the 2022 whipsaws are a small sample. The 3-month momentum page shows the rule on all 59 funds, and the VTV page shows all 12 rules on this fund.
Build it from blocks (or type it in English), backtest it on 5.7 years of minute data in seconds, tweak any parameter, then paper trade it on live data. No card, no broker needed to start.
Frequently asked questions
Did 3-month momentum beat buy-and-hold on VTV?
Over 2021-01-04 to 2026-10-02, 3-month momentum on VTV returned 5.7% annualized vs 13.4% for buy-and-hold: it trailed buy-and-hold by 7.7% per year, with a maximum drawdown 5.0 points shallower than holding (11.8% vs 16.8%).
How many trades did it make?
10 completed round trips over 5.7 years (20 fills), with 60% of round trips closing profitably.
Why 63 days?
63 trading days is about one quarter, a common momentum lookback. You can sweep it in DeployQuant to see how the horizon changes results.
How did 3-month momentum do on VTV?
It returned 5.70% a year from 2021-01-04 to 2026-10-02, turning $10,000 into $13,747.10, with an 11.77% maximum drawdown and a Sharpe of 0.72. Buy-and-hold on VTV returned 13.44%, ended at $20,622.94 and fell 16.81%.
Did the rule beat buy-and-hold in any year?
No. It trailed in all six calendar years. The smallest gap was 0.9 points in 2026 to date and the largest was 20.8 points in 2021, when the rule did not enter until 2021-04-07.
What happened in 2022?
The rule lost 8.4% against 2.0% for buy-and-hold. It made short losing trades on 2022-03-03 to 2022-03-09 (-1.99%) and 2022-09-20 to 2022-09-23 (-3.57%), and a third that closed at -1.34% on 2023-02-23.
Which trade made the money?
The entry on 2025-07-08 at an adjusted price of 173.40, sold on 2026-10-01 at 216.035, returned 24.59% over 450 days. The next best trade returned 9.40%.
Does a higher entry threshold help?
Entering above 10% returned 5.41% with a 7.85% drawdown and a Sharpe of 0.842 on 5 trades. Entering above 15% returned 5.09% with a 6.17% drawdown on 4 trades. Both samples are small.
How much do costs matter?
At 5 basis points the CAGR was 5.55% and at 10 basis points it was 5.35%, against 5.70% with no costs. The rule made only 20 fills.
How does VTV compare with other index funds under this rule?
VOOG returned 8.80%, IOO 8.43%, VOO 8.25% and QQQ 8.21%. VOOV returned 2.38%, and VTV's 5.70% sits below the 8% median for the 12 broad index funds.
Related
Backtests are hypothetical, computed by DeployQuant's engine on minute-resolution consolidated US market data (2021-01-04 to 2026-10-02, $10,000 starting capital, no margin, no fees or slippage in the headline run; buy-and-hold puts 98% of the account in at the first open, as the templates do) and do not guarantee future results. Nothing on this page is investment advice. Live trading involves risk of loss.