The thesis
donchian-breakout is a classic trend-following system: buy 20-day high breakouts and exit on 20-day lows. It runs over a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), payments (V, MA), staples (PG, KO, WMT, COST) and energy (XOM, CVX). The logic is old, well-understood, and refreshingly interpretable — there is no black box here, just price making new highs.
Backtest and validation
Over 451 days the strategy returned 6.95% (final equity $10,695), a CAGR of 3.83%. That headline hides the texture: a Sharpe of just 0.34, a 21.73% max drawdown, and a 38.46% win rate across 108 trades. The low hit rate is not a bug — it is the signature of trend following, which loses small repeatedly and wins big occasionally. Turnover of 2,082% confirms the strategy trades actively.
The walk-forward tells a more interesting story. Three of four folds were positive, and the two most recent out-of-sample windows were genuinely strong: fold 3 returned 14.09% (Sharpe 2.72) and fold 4 returned 11.35% (Sharpe 1.86). The out-of-sample return of 11.35% actually beat the full-sample figure. The weak spot is fold 2 — a −7.46% stretch with a −1.07 Sharpe and a 15.58% drawdown through early 2025.
Crucially, validation did not pass. The Probabilistic Sharpe Ratio sits at 0.674, but the Deflated Sharpe Ratio — which penalises for the 6 trials run — collapses to 0.198. In plain terms: once you account for how many variants were tried, the evidence that this edge is real becomes weak. The recent folds look great, but a single bad regime and a thin deflated statistic keep this out of auto-deploy territory.
Recent activity
The last real action was on 29 October, when the strategy executed four breakout buys: ABBV (8 @ $289.91), MA (3 @ $636.60), HD (7 @ $328.57) and WMT (20 @ $121.17). Since then it has been quiet — scheduled runs on 3–10 November all report 0 executed, 1–2 rejected. Cash has been pinned at $959.13 the entire week, which almost certainly explains the rejections: with ~$9,300 already deployed and under a thousand dollars free, fresh breakout signals have nowhere to go. Total equity has drifted between roughly $10,015 and $10,391 — currently $10,263.
Verdict
The strengths are real: positive total return, a convincing pair of recent out-of-sample folds, and a transparent, battle-tested rule set. But the risks are equally real — a sub-0.35 overall Sharpe, a chunky drawdown, and a failed validation gate driven by a deflated Sharpe near zero. The current cash crunch also means the system is effectively fully invested and unable to act on new breakouts. This is a strategy worth watching, not yet one worth trusting.