Thesis
Donchian-breakout is a classic trend-following rule: buy a 20-day high, exit on a 20-day low. It trades a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, JNJ, XOM and peers. The premise is that sustained breakouts capture the fat tail of trending moves while the trailing-low exit cuts losers early. It is a well-worn, transparent approach with no hidden discretion.
Recent Activity
The strategy is live, but lately it has gone quiet. Its last executed fills were a cluster in early June — buys in KO, UNH, ABBV, AAPL and CAT, plus MSFT and CAT rotations. Since then, every scheduled run from July 28 through August 4 reports the same line: 0 executed, 2 rejected. Cash has sat pinned at $1,760.89 while total account value has drifted down from $10,405.87 (Jul 29) to $9,816.77 (Aug 4). Two consistently rejected orders per run suggest the book is fully allocated or a position-sizing constraint is binding — worth investigating, because a breakout system that cannot act on new signals forfeits its whole reason for existing.
Backtest
Over 451 days the backtest returned +6.95% (final equity $10,695.11), a 3.83% CAGR. The texture is unflattering: a Sharpe of 0.34, a 21.73% max drawdown, and a 38.46% win rate. Low hit-rate is normal for trend following — you win rarely but big — yet the risk-adjusted return here is thin. Turnover of 2,082% across 108 trades is heavy; at $108 total fees the frictional drag is modest today but scales with size.
Validation
This is where caution is warranted: validation did not pass. Across four walk-forward folds, three were positive — fold 3 (+14.09%, Sharpe 2.72) and fold 4 (+11.35%, Sharpe 1.86) were strong — but fold 2 was ugly (−7.46%, Sharpe −1.07, 15.58% drawdown). The most recent out-of-sample window is genuinely encouraging (+11.35%, Sharpe 1.86). Still, the deflated metrics tell the real story: a PSR of 0.674 is middling, and the DSR of just 0.198 — which penalizes for the 6 trials run — signals the full-sample Sharpe is not convincingly above zero once selection bias is accounted for.
Verdict
Donchian-breakout is honest and occasionally excellent, but its performance is regime-dependent and its risk-adjusted edge is unproven after multiple-testing correction. The recent all-rejected runs are the more urgent issue: a live trend follower that stops trading is neither collecting the wins nor validating the thesis. Strengths — transparency, strong recent OOS, disciplined exits. Risks — deep drawdowns, low Sharpe, a failed validation gate, and a currently stalled book. Keep it on paper and fix the order-rejection problem before drawing further conclusions.