The Thesis
Donchian-breakout is textbook trend following: buy a 20-day high, exit on a 20-day low. It runs across a 24-name universe of U.S. large caps — mega-cap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (UNH, ABBV), and staples (KO, PG, WMT). The logic is deliberately simple and mechanical, which is both its appeal and its constraint: it makes no attempt to time reversals, only to ride established momentum until it breaks.
Recent Activity
The live account is currently subdued. Across six scheduled runs from July 7 to July 14, the strategy executed zero trades and rejected one or two candidate orders each day, sitting on $1,760.89 in cash with total account value drifting between roughly $9,863 and $9,957. In other words, no fresh 20-day highs cleared its filters — a plausible sign of a chop or pullback regime where breakouts keep failing.
The last real activity came in early June: buys in KO (23 @ $83.69), UNH, ABBV, AAPL, and CAT, alongside sells in CAT and MSFT. The MSFT round-trip is instructive — bought at $450.24 on May 31, sold at $404.21 on June 9, a clean example of the exit rule cutting a position that rolled over rather than trended.
Backtest & Validation
The headline backtest is unremarkable: +6.95% total return over 451 days (3.83% CAGR), a 0.34 Sharpe, and a 21.73% max drawdown. Win rate is 38.46% across 108 trades — low, but characteristic of trend following, where a minority of large winners are meant to pay for many small losers. Turnover is heavy at 2,082%, and fees ($108) are non-trivial against these returns.
Walk-forward validation is where the picture gets more interesting — and more cautionary. Three of four folds were positive, and the two most recent out-of-sample windows were genuinely strong (+14.09% at 2.72 Sharpe, then +11.35% at 1.86). But fold 2 lost 7.46% at a -1.07 Sharpe, exposing real regime sensitivity.
Crucially, the strategy did not pass our gate. The probabilistic Sharpe ratio (0.674) is respectable, but the deflated Sharpe ratio — which discounts for the 6 trials behind this result — sits at just 0.198. That is the number to respect: once you account for multiple testing, the evidence that this edge is real, not lucky, is thin.
Verdict
Donchian-breakout is a clean, interpretable trend-follower with encouraging recent out-of-sample folds. But a sub-0.35 full-period Sharpe, a 22% drawdown, and a failing deflated-Sharpe score mean it stays in the 'live-but-unproven' bucket. Watch whether it re-engages when breakouts return — and treat the strong recent folds as a hypothesis, not a conclusion.