The thesis
donchian-breakout is textbook trend-following: buy when price closes at a 20-day high, exit when it prints a 20-day low. The bet is simple and old — that breakouts to new highs tend to continue, and that cutting at new lows caps the damage on the trades that don't. It runs across a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy (AAPL, MSFT, NVDA, JPM, V, JNJ, XOM, and the like), so it is diversified by construction rather than concentrated in a single theme.
Recent activity
The strategy is live and currently sitting on a total account value near $10,062 with $1,510.88 in cash. The story of late August is one of inactivity: the scheduled runs on the 24th through the 31st each executed zero trades while rejecting one or two candidate orders per run. Account value drifted down slightly over that window (from ~$10,229 to ~$10,062), consistent with holding through a soft patch rather than trading it.
The last real fills came earlier. In mid-August the book rotated — buying V (5 @ $362.35) and MA (3 @ $559.85) while selling AAPL (7 @ $301.65) and UNH (3 @ $399.25). June saw a similar mix, including a KO accumulation and a partial CAT exit. This is the expected rhythm for a breakout system: long stretches of nothing, punctuated by rotation when new highs or lows trigger.
Backtest and validation
Over 451 days the backtest returned +6.95% (final equity $10,695), a 3.83% CAGR, with a Sharpe of just 0.34 and a 21.73% max drawdown. The win rate is a low 38.46% across 108 trades — normal for trend-following, which relies on a few large winners to outweigh many small losers. Turnover of ~2,083% is high; fees ($108) are non-trivial against a $695 gross gain.
The walk-forward validation is where the picture gets interesting — and cautionary. The gate did not pass. Three of four out-of-sample folds were positive, and the two most recent folds were genuinely strong (Fold 3: +14.09%, Sharpe 2.72; Fold 4: +11.35%, Sharpe 1.86). But Fold 2 (Jan–Jul 2025) lost 7.46% at a Sharpe of −1.07, and the deflated Sharpe ratio (DSR 0.198) — which penalises for the 6 trials run — is weak even though the probabilistic Sharpe (PSR 0.674) looks respectable in isolation.
Verdict
The strengths are real: a coherent, well-understood edge; broad diversification; and two recent OOS folds that behaved exactly as a healthy trend-follower should. But the risks are equally clear. A sub-0.5 full-sample Sharpe, a 20%+ drawdown, a failing validation gate, and a low DSR all argue that recent performance may owe as much to a friendly trend regime as to durable edge. Fold 2 is the honest reminder of how this strategy behaves in a choppy market. It has earned its live slot on merit of design, not yet on statistical confidence — one to hold on a short leash and watch through the next non-trending stretch.