The Thesis
channel-pullback is a trend-following mean-reversion hybrid: it buys pullbacks to the lower regression channel or volume support within confirmed uptrends, then exits at the upper channel or resistance. The universe is 24 large-cap US names spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, V, JNJ, XOM, CAT, and peers. It is a sensible, well-worn idea: only fade dips in names that are already climbing, and take profit at the band's ceiling rather than reaching for a home run.
Headline Performance
The full backtest covers 451 days and 137 trades, ending at $10,761.52 on a $10k stake — a total return of +7.62% (CAGR 4.19%). The supporting statistics are more sobering:
- Sharpe 0.40 — modest risk-adjusted reward
- Max drawdown 14.83% — roughly double the annualised return
- Win rate 39.39% — this strategy loses more often than it wins, relying on winners outsizing losers
- Turnover 2,311% — very high churn, meaning fees and slippage matter
A sub-40% win rate is not disqualifying for a pullback system, but it demands that exits are disciplined and losers are cut cleanly. The high turnover amplifies that requirement.
Validation: The Gate It Didn't Clear
Our walk-forward validation flags this strategy as failed. Across four folds, three were positive, but the dispersion is the story:
- Fold 1: +6.53% (Sharpe 1.25)
- Fold 2: −11.42% (Sharpe −1.70, 16% drawdown)
- Fold 3: +20.68% (Sharpe 3.86)
- Fold 4: +3.63% (Sharpe 0.74)
The combined out-of-sample return is +3.63% at Sharpe 0.74 — respectable, but heavily dependent on the fold-3 boom. The Probabilistic Sharpe Ratio (0.702) is borderline, while the Deflated Sharpe Ratio of 0.196 — adjusting for the 7 trials run — is the killer. After accounting for multiple testing, we can't be confident the edge is real rather than lucky.
Live Reality Check
Recent scheduled runs are quiet: most days execute zero or one trade, and the live paper account totals around $9,457 — below its $10k origin, in contrast to the profitable backtest. Recent activity is dominated by short AAPL round-trips (buy ~$308–315, sell a day or two later) plus dips into UNH, JPM, and CAT. The strategy is behaving as designed — small, frequent, low-conviction rotations — but has yet to demonstrate a live edge.
Verdict
Strengths: a coherent thesis, genuine strength in two of four folds, and controlled per-trade sizing. Risks: a failed validation gate, a deflated Sharpe that screams overfitting risk, a punishing fold-2 loss period, and a live account that is currently underwater. channel-pullback is worth watching, not funding. Until it survives validation and shows live traction, treat it as an experiment — not a signal.
This is not financial advice.