How SectorFlow Works

1 Universe: the S&P 500

Each day SectorFlow considers the roughly 500 stocks in the S&P 500 as its investment universe. This keeps the strategy liquid and focused on large-cap US equities with real price history.

A liquidity filter removes any stock trading below a minimum price or average daily volume threshold, so the portfolio only contains names you can actually trade.

2 Momentum Scoring

Every stock is scored by its price momentum over approximately 9 months (189 trading days). The most recent 21 days are deliberately excluded — this is known as a momentum skip, and it avoids chasing short-term noise that tends to reverse.

• lookback: 189 trading days (~9 months)
• skip: most recent 21 days excluded
• minimum momentum score required to be eligible for inclusion
• maximum volatility cap: stocks with annualised volatility above 60% are excluded

3 Sector Concentration Limits

To avoid the entire portfolio piling into one sector during a hot trend, SectorFlow enforces hard concentration limits:

• maximum 3 stocks from any single GICS sector
• maximum 30% of the portfolio in any single sector
• 10 holdings total — equal weight (10% each)

If the top momentum stocks all come from, say, Technology, the system drops the lowest-ranked ones and fills the remaining slots with the best-ranked stocks from other sectors.

4 SPY Trend Filter

Before committing to any stock picks, SectorFlow checks the direction of the overall market using SPY as a proxy. If the broader market momentum is negative, the system moves to a defensive cash-equivalent position instead of holding stocks.

This acts as a macro filter — when the tide is going out, staying out of the water is often better than picking the best swimmers.

5 Rebalance Cadence

The portfolio does not trade daily. It rebalances approximately every 84 days (roughly quarterly). On each rebalance date, the current holdings are compared to the fresh signal basket. Only positions that have changed are traded.

6 Risk Guardrails

Even a well-designed strategy can suffer severe drawdowns. SectorFlow includes automatic protection:

• Circuit breaker: if the portfolio drops more than 15% from its recent peak, the system rotates automatically to SPY (defensive mode)
• Recovery threshold: normal signals resume once the portfolio recovers above the −7% level from peak
• Daily risk metrics: Sharpe, Sortino, Calmar ratios and rolling max drawdown are calculated and published every trading day

7 Public Daily Track Record

SectorFlow has been running in paper trading mode since January 29, 2026. Every trading day the full performance record — portfolio value, SPY comparison, daily return, risk metrics — is published publicly at the track record page.

This is not a backtest. It is a real-time simulation using actual market prices, with no changes allowed to the strategy during the live period.

Frequently Asked Questions