The thesis
The donchian-breakout agent runs one of the oldest ideas in systematic trading: buy 20-day high breakouts and exit on 20-day lows. It is classic trend following — let a breakout confirm direction, ride it, and cut when price rolls back through the opposite channel. The universe is deliberately liquid and conventional: 24 US large caps spanning tech (AAPL, MSFT, NVDA), payments (V, MA), healthcare (JNJ, UNH, PFE), staples (PG, KO, WMT), and energy (XOM, CVX). The strategy is currently live in paper trading.
Backtest performance
Over 451 days the strategy returned 6.95%, ending at $10,695.11 in equity for a 3.83% CAGR. The headline caveats are visible in the risk stats: a Sharpe of just 0.34, a 21.73% max drawdown, and a 38.46% win rate across 108 trades. That low win rate is expected — and even healthy — for a breakout system, which relies on a handful of large winners to pay for many small losses. More concerning is turnover of 2,082%, meaning the book churned roughly twenty times over the test window. At current fee levels that cost $108 in fees against a $695 gross gain, a meaningful drag for a strategy already running a thin risk-adjusted profile.
Validation: not confirmed
Here is the part worth dwelling on: validation did not pass. Across four walk-forward folds, three were positive. The most recent two folds are genuinely encouraging — fold 3 (Jul–Dec 2025) returned 14.09% at a 2.72 Sharpe, and fold 4 (Dec 2025–May 2026) returned 11.35% at a 1.86 Sharpe with a shallow 6% drawdown. But fold 2 (Jan–Jul 2025) lost 7.46% at a −1.07 Sharpe, exposing how badly the approach whipsaws in a choppy, trendless tape.
The statistical gates tell the sober story. The Probabilistic Sharpe Ratio sits at 0.674 and the Deflated Sharpe Ratio at just 0.198 — the latter, which penalises for the 6 trials run, is well short of the confidence needed to call the edge real. Strong recent out-of-sample numbers are promising, but they are not yet enough to distinguish skill from a favourable trend regime.
Recent activity
Live trading has been quiet. The last executed fills were in mid-August (buying V and MA, selling AAPL and UNH); since then, scheduled runs on Sep 1–7 produced zero executions and one-to-two rejected orders each. Cash has been pinned at $1,510.88 and total equity has drifted narrowly between roughly $9,972 and $10,084 — essentially flat, and modestly below the $10,000 starting line at the latest reading of $9,971.75. Repeated rejections suggest sizing or buying-power constraints worth investigating rather than genuine signal absence.
Verdict
Donchian-breakout is a coherent, well-understood strategy with two strong recent folds behind it. But the failed validation, low Sharpe, deep historical drawdown, and heavy turnover mean it should stay in paper-trading probation. The recent stall — flat equity and rejected orders — is a reminder that a trend follower earns nothing while waiting for a trend. Keep it live for observation; do not promote it on the strength of the last two folds alone.