Thesis
Donchian-breakout is a classic trend-follower: buy 20-day high breakouts and exit on 20-day lows, applied across a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy (AAPL, MSFT, NVDA, JPM, V, JNJ, XOM, CAT, and more). The logic is deliberately simple and rides the oldest edge in the systematic playbook — cut losers at the channel low, let winners run to new highs.
Recent Activity
August has been quiet by design. Across six scheduled runs from Aug 18 to Aug 25, the strategy executed zero trades and rejected 9 signals, holding a steady $1,510.88 in cash. Total account value oscillated between roughly $9,949 and $10,261 over that window — a sign of open positions marking to market while no new breakouts cleared the entry filter. The last executed fills came in mid-August: buying V (5 shares at $362.35) and MA (3 at $559.85) while trimming UNH and AAPL. That mix of adds and exits is consistent with a channel system rotating out of names that broke their 20-day low.
Backtest & Validation
Over a 451-day backtest the strategy returned 6.95% (final equity $10,695, ~3.83% CAGR) on 108 trades. The headline caveats are real: a Sharpe of just 0.34, a 21.73% max drawdown, a 38.46% win rate, and eye-watering 2,082% turnover. That is a low-hit-rate, high-churn profile — it wins by size, not frequency, and pays for it in drawdown and fees ($108 in costs).
The walk-forward picture is more nuanced. Three of four folds were positive, and the two most recent folds were genuinely strong: +14.09% (Sharpe 2.72) and +11.35% (Sharpe 1.86) with shallow 3–6% drawdowns. The weak link was fold 2 (Jan–Jul 2025), which lost 7.46% at a Sharpe of −1.07 and a 15.58% drawdown — the choppy, whipsaw regime that punishes every breakout system.
The Verdict
Crucially, validation did not pass. Despite an encouraging out-of-sample return of 11.35% and a Probabilistic Sharpe Ratio of 0.674, the Deflated Sharpe Ratio is only 0.198 — once you account for 6 trials, the evidence for a real edge is thin. The full-sample Sharpe of 0.34 simply isn't high enough to survive that deflation.
The honest read: donchian-breakout has a coherent thesis and a recent hot streak, but its long-run numbers are pedestrian and its statistical case is unconfirmed. It behaves exactly as trend-following should — dormant in range-bound tape, decisive on genuine breakouts — but investors should treat the strong recent folds as regime luck until the deflated statistics catch up. For now, it stays a live experiment worth watching, not trusting.