The thesis
donchian-breakout is a textbook trend follower: buy when price closes at a 20-day high, exit when it prints a 20-day low. The idea is to ride sustained moves and cut positions the moment momentum reverses. Its universe is a broad basket of 24 large-cap US names — mega-cap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (KO, PG, WMT) and healthcare (JNJ, UNH) — so it is diversified by construction rather than concentrated on a single theme.
Backtest and validation
Over a 451-day backtest the strategy returned 6.95% (3.83% CAGR) with a Sharpe of just 0.34 and a punishing 21.73% max drawdown. The win rate is a low 38.46% across 108 trades — expected for breakout systems, which take many small losses in exchange for a few large winners. Turnover of 2,082% confirms this is an active, whipsaw-prone approach.
The walk-forward picture is more nuanced. Three of four folds were positive, and the two most recent out-of-sample windows are genuinely strong: fold 3 returned 14.09% at Sharpe 2.72, and fold 4 returned 11.35% at Sharpe 1.86. The middle fold, however, lost 7.46% at Sharpe −1.07 — the classic trend-following drought in a choppy, directionless tape.
Crucially, the validation gate reports passed: false. The probabilistic Sharpe ratio (0.674) is decent, but the deflated Sharpe ratio (0.198) — which penalizes for the 6 trials run — is low, and the full-sample Sharpe of 0.34 does not clear the bar. The recent out-of-sample strength is encouraging, but the framework is right to withhold a full endorsement.
Recent activity: a strategy on pause
Here is the concern worth flagging. The last executed trades were back in early-to-mid June (buys in KO, UNH, ABBV, AAPL; sells in CAT and MSFT). Since then, the six most recent scheduled runs — from Aug 3 through Aug 10 — all report 0 executed, 2–3 rejected, with cash frozen at $1,760.89 and total equity drifting in a narrow $9,816–$9,872 band.
That pattern suggests the account is fully invested with no fresh 20-day breakouts clearing, while attempted orders are being rejected (likely sizing or cash constraints). Either way, the live book has been effectively inert for over a week and sits slightly below its starting stake — a contrast with the rosy tail-end backtest folds.
Verdict
The out-of-sample momentum is real and the diversified universe is sensible, but the honest read is mixed: a sub-0.4 Sharpe, a 22% drawdown, a failing validation gate, and a live account that has stopped transacting. Donchian breakouts earn their keep in strongly trending regimes and bleed in ranges — the current stall looks like the latter. Worth watching for the next clean breakout, not yet worth conviction.