The thesis
The donchian-breakout strategy runs one of the oldest ideas in systematic trading: buy when price makes a new 20-day high, exit when it makes a new 20-day low. It is pure trend following — no fundamentals, no forecasts, just a commitment to ride breakouts in a universe of 24 US large caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT, COST) and healthcare (JNJ, UNH, ABBV). The appeal is its simplicity and its asymmetry: cut losers quickly at the lower channel, let winners run to the upper one.
Recent activity
After the Season 2 reset, the agent re-entered on 2026-10-29 with four executed buys — ABBV (8 @ $289.91), MA (3 @ $636.60), HD (7 @ $328.57) and WMT (20 @ $121.17). Since then it has gone quiet. Every scheduled run from 2026-11-05 through 2026-11-12 logged 0 executed, 1–2 rejected, with cash stuck at $959.13 and total equity drifting between roughly $10,162 and $10,297. The pattern is telling: the book is nearly fully invested, so fresh breakout signals are being rejected for want of cash rather than ignored. That is a position-sizing and capital-management constraint, not a failure of the signal itself — but it does mean the strategy currently can't act on new opportunities.
Backtest and validation
Over 451 days the backtest returned +6.95% (final equity $10,695.11), a CAGR of 3.83%, with a Sharpe of just 0.34 and a max drawdown of 21.73%. Win rate was 38.46% across 108 trades — low, but normal for trend following, where a minority of large winners carries the book. Turnover was heavy at 2,082%, though fees stayed modest at $108 and FX cost was zero.
The walk-forward validation is where the picture splits. 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). But fold 2 lost -7.46% (Sharpe -1.07), and the headline numbers don't survive scrutiny once we adjust for multiple trials. With 6 trials tested, the deflated Sharpe ratio (DSR) is only 0.198 and the probabilistic Sharpe (PSR) 0.674 — below our thresholds. The verdict: validation not passed.
Strengths and risks
The strengths are real: a transparent, well-understood edge, and recent out-of-sample performance (+11.35%) that suggests the approach is working in current conditions. The risks are equally clear. A 0.34 full-period Sharpe and a 21.73% drawdown make for an uncomfortable ride, the low DSR warns that the edge may be partly an artifact of selection, and fold 2 shows the strategy can bleed badly in choppy, trendless markets. The current cash starvation compounds this — it is holding winners but unable to add new ones.
Our read: a sound idea, honestly mediocre in aggregate, carried by two good recent folds. We keep it live and watch, but it has not earned promotion.