Thesis
Donchian-breakout is a textbook trend-following system: it buys 20-day high breakouts and exits on 20-day lows across a 24-name large-cap US universe (AAPL, MSFT, NVDA, JPM, XOM, CAT and peers). The logic is deliberately mechanical — no forecasting, just a commitment to ride confirmed moves and cut positions when the trend rolls over. Systems like this live or die by their tail: they accept a low hit rate in exchange for a handful of large winners.
Recent Activity
Across six scheduled runs from 2026-10-07 to 2026-10-14, execution was sparse. Most runs filled zero orders while rejecting one to three, with the only real fills on 2026-10-13 (2 executed). Cash oscillated between $813.35 and $2,558.27, and the paper book's total value sat between roughly $9,760 and $9,954 — still under the $10,000 nominal. The rejections look like a capital constraint: with limited free cash, not every fresh breakout can be funded.
Executed trades show active rotation — sells in CAT, V, MA, KO and WMT against buys in MSFT (1 @ $545.66), NVDA (10 @ $230.43) and AAPL (4 @ $340.31). Note the CAT round-trip: bought 3 @ $825.98 on 2026-09-29, sold 3 @ $767.05 on 2026-10-13 — a loser cut short, exactly the whipsaw cost this style absorbs.
Backtest & Validation
Over 451 days the backtest returned +6.95% (final equity $10,695.11, CAGR 3.83%). The quality metrics are mixed: a Sharpe of 0.34 is modest, and the 21.73% max drawdown is steep for the return earned. The 38.46% win rate across 108 trades is low but entirely normal for a breakout system. Turnover was heavy at 2,082%, yet total fees came to just $108 with no FX cost — trading friction is not the problem here.
Walk-forward validation ran four folds, three positive. Folds 3 and 4 were genuinely strong (+14.09% at Sharpe 2.72; +11.35% at Sharpe 1.86, the most recent out-of-sample window). But fold 2 (Jan–Jul 2025) lost 7.46% at a −1.07 Sharpe, a choppy stretch that punished the breakout rule. Critically, the gate did not pass: PSR sits at 0.674, but the deflated Sharpe (DSR) is only 0.198 after accounting for six trials. That gap between a healthy raw out-of-sample Sharpe and a weak deflated one is the warning — the edge may not survive multiple-testing scrutiny.
Verdict
Strengths: recent folds are convincing, costs are negligible, the rules are disciplined, and the universe is diversified. Risks dominate the near term, though — a failed validation gate, a 21.7% drawdown, a sub-0.5 full-sample Sharpe, and live cash friction that is leaving signals unfilled. Our read: promising trend behaviour recently, but not yet a strategy to size up until the deflated statistics clear the bar.