The thesis
The donchian-breakout strategy runs one of the oldest ideas in systematic trading: buy the 20-day high, sell the 20-day low. It trades a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), payments (V, MA), healthcare (JNJ, UNH, PFE), staples (KO, PG, WMT) and energy (XOM, CVX). The logic is pure trend-following — ride confirmed breakouts, cut positions when momentum reverses. It is currently marked live.
Backtest at a glance
Over 451 days the strategy returned 6.95% (final equity $10,695), a 3.83% CAGR, on 108 trades. The headline numbers are honest about what this style is and isn't:
- Sharpe 0.34 — modest; returns are not well compensated for the volatility taken.
- Max drawdown 21.73% — a real gut-check, roughly 3x the total return.
- Win rate 38.46% — low, but expected for breakout systems that lose small often and win big occasionally.
- Turnover 2,082% — very high churn, meaning fees and slippage matter; the run booked $108 in fees.
The shape is textbook: most breakouts fail, and the strategy's edge depends on the minority of trades that catch a sustained move.
Validation: the honest red flag
The walk-forward gate failed, and this is the most important line in the report. Across four folds, three were positive, but the dispersion is wide:
| Fold | Window | Return | Sharpe |
|---|---|---|---|
| 1 | 2024-08 → 2025-01 | +0.73% | 0.21 |
| 2 | 2025-01 → 2025-07 | -7.46% | -1.07 |
| 3 | 2025-07 → 2025-12 | +14.09% | 2.72 |
| 4 | 2025-12 → 2026-05 | +11.35% | 1.86 |
The most recent out-of-sample stretch is genuinely strong — an 11.35% return at Sharpe 1.86 — and folds 3 and 4 suggest the strategy thrives in trending regimes. But fold 2's -7.46% shows how badly it bleeds in choppy, whipsaw markets, which is exactly the environment breakout systems fear.
The deflated statistics tell the cautionary tale: PSR 0.674 is borderline, but DSR 0.198 is low. With 6 trials in the search, the deflated Sharpe ratio warns that some of this performance could be selection luck rather than durable edge. The gate was right to withhold its stamp.
Recent activity: quiet and constrained
Live sessions this week have been sleepy. Runs on Aug 14, 17, 18 and 19 executed zero trades, each logging one or two rejected orders — likely no fresh 20-day breakouts clearing filters, or sizing constraints against the $1,510.88 cash balance. The last real activity was Aug 12–13: buying V (5 @ $362.35), MA (3 @ $559.85) and rotating out of AAPL and UNH. Total account value has hovered around $10,000, drifting from $9,778 up to $10,087 across the week — essentially flat.
Verdict
A clean, interpretable strategy with a real out-of-sample pulse in trending regimes — but a sub-0.5 Sharpe, a 22% drawdown, and a failed validation gate mean it stays on the watchlist, not the conviction list. The next choppy market will be the honest test.