The thesis
Channel-pullback marries trend-following with mean reversion: in confirmed uptrends, it buys dips toward the lower regression channel or volume support, then exits near the upper channel or resistance. It trades a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH, PFE), staples (PG, KO, COST) and energy (XOM, CVX). The strategy is currently live.
Recent activity
The last two weeks show the pattern in action. On 2 October it bought CVX at $207.21 and exited at $211.95 on the 8th; a 5 October XOM entry at $163.77 was sold at $168.81 three days later. PFE saw rapid round-trips — sold, rebought at $27.83, then sold again at $28.17 — the kind of churn the thesis invites. The most recent run (14 October) added 9 shares of NVDA at $220.45. The live paper account stood at a total value of $11,034.57 with $7,275.95 in cash after that run. Scheduled runs are quiet by design: most days execute zero trades, with occasional bursts of two or three.
Backtest and validation
Over 451 days the backtest returned 7.62% (4.19% CAGR), ending at $10,761.52 equity, with a Sharpe of 0.40 and a 14.83% max drawdown. The win rate is a low 39.39% across 137 trades, so profitability leans on winners outrunning losers rather than on hit frequency. Turnover is heavy at 2,311% — though fees totalled just $137 and FX cost nothing.
The walk-forward validation is where caution enters. Across four folds, three were positive, but fold 2 (Jan–Jul 2025) lost 11.42% at a Sharpe of −1.70, while fold 3 (Jul–Dec 2025) surged 20.68% at a Sharpe of 3.86 — enormous regime dependence. The out-of-sample fold returned 3.63%, less than half the full-sample figure. Most tellingly, the validation gate failed: against 7 trials the deflated Sharpe ratio is just 0.196 (PSR 0.702), signalling that the headline Sharpe may not survive multiple-testing correction.
Strengths and risks
The strengths are genuine: positive full-sample and out-of-sample returns, three of four folds in the green, cheap execution, and a disciplined low-activity cadence. But the risks dominate the honest read. A sub-0.5 Sharpe, a below-50% win rate, violent fold-to-fold swings, and — above all — a failed deflated-Sharpe test suggest this looks more like a strategy that caught a favourable regime than one with a durable edge. Small-size paper trading is the right venue for it now. Channel-pullback has earned continued observation, not yet capital conviction.