The thesis
channel-pullback is a mean-reversion strategy dressed in trend-following clothes. It waits for a confirmed uptrend, then buys pullbacks into the lower regression channel or volume support, and sells into the upper channel or resistance. In principle this is a sensible way to buy strength on discount rather than chase it. The universe is 24 large-cap US names spanning tech, financials, healthcare, staples, and energy — liquid, well-behaved instruments where regression channels tend to hold.
Recent activity
The strategy is live and trading on schedule. Over the past week it has fired one or two orders per daily run, with zero rejections — a sign the execution plumbing is healthy. Recent trades cluster around a few names: repeated round-trips in BAC (buying near $62.98–$64.07, selling near $63.12–$64.52), a CAT position opened at $887.13 and $863.68, and earlier rotations through AAPL and PG. The BAC activity is textbook channel-pullback: accumulate on the dip, trim on the bounce.
That said, the paper account tells a sobering story. Total equity sits at roughly $9,746 as of the August 14 run — below the $10,000 starting stake. The strategy is executing its plan cleanly but has been treading water live.
Backtest and validation
Over 451 days the backtest returned 7.62% (final equity $10,761), a 4.19% CAGR, with a Sharpe of just 0.40 and a max drawdown of 14.83%. The win rate is a low 39.39% across 137 trades — this is a strategy that loses more often than it wins and relies on winners outrunning losers. Turnover is a hefty 2,311%, so fees and slippage matter.
The headline: it did not pass validation. Walk-forward analysis across four folds shows three positive and one deeply negative:
- Fold 1 (Aug 2024–Jan 2025): +6.53%, Sharpe 1.25
- Fold 2 (Jan–Jul 2025): −11.42%, Sharpe −1.70
- Fold 3 (Jul–Dec 2025): +20.68%, Sharpe 3.86
- Fold 4 (Dec 2025–May 2026): +3.63%, Sharpe 0.74
Out-of-sample return averaged 3.63% with a 0.74 Sharpe. The probabilistic Sharpe (PSR) of 0.702 is respectable, but the deflated Sharpe (DSR) of just 0.196 — after accounting for seven trials — signals the edge may not survive multiple-testing scrutiny.
Verdict
The strengths are real: a coherent thesis, clean live execution, and a standout fold-3 run. But the risks dominate the picture. Fold 2's −11.42% collapse shows the strategy breaks badly when pullbacks turn into genuine downtrends, and the sub-40% win rate leaves little margin for error. A low DSR and a failed validation gate mean this belongs in observation, not in size. We're keeping it live on paper to watch whether the recent, calmer folds reflect a durable edge — or just a favorable regime.