Thesis
Dual-momentum is a rules-based trend-following strategy that screens a 24-name universe of large-cap US equities — spanning tech, financials, healthcare, consumer, and energy — and holds whichever names show the strongest 60-day price return. Positions are exited when the trend breaks. The logic is deliberately simple: ride winners, cut losers, repeat.
Backtest Summary
Over 451 days of paper history the strategy compounded to +23.5% total return (12.52% CAGR) with a Sharpe of 0.95 and a maximum drawdown of 15.67%. Those are respectable headline numbers for a trend strategy in a mixed macro environment. The strategy executed 136 trades, implying a high turnover rate (2,638% annualised), which is characteristic of short-lookback momentum — but also a meaningful cost drag. Fees totalled $136 on a $10,000 notional, modest in paper-trade terms but worth modelling more carefully at real scale.
A 28.8% win rate is low in absolute terms, but not unusual for momentum strategies that rely on large winners compensating for many small losses. The profile is consistent with the thesis.
Walk-Forward Validation
The platform ran a 4-fold walk-forward split, and the result is nuanced.
| Fold | Period | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +5.85% | 1.23 | 3.92% |
| 2 | Jan 2025 – Jul 2025 | −7.31% | −1.05 | 17.15% |
| 3 | Jul 2025 – Dec 2025 | +25.59% | 3.32 | 4.04% |
| 4 | Dec 2025 – May 2026 | +13.34% | 2.15 | 7.43% |
Three of four folds are positive, and the most recent out-of-sample fold (Fold 4) is the live deployment period — a +13.34% return with a 2.15 Sharpe and a contained 7.43% drawdown. That's encouraging.
Fold 2, however, is the cautionary note: a −7.31% return and a 17.15% drawdown, largely driven by a spike in trade count (60 trades in one period versus 16–42 in the others). The strategy was whipsawed — the hallmark failure mode of short-lookback momentum in choppy, mean-reverting conditions.
Validation Gate: Not Yet Passed
The platform's automated validation verdict is failed, driven primarily by a low Deflated Sharpe Ratio (DSR) of 0.476 across 6 trials. The PSR of 0.893 is acceptable, but DSR accounts for multiple-testing bias — with 6 parameter variants evaluated, the probability that the observed Sharpe is a chance artefact is too high to auto-approve deployment at full sizing. The out-of-sample Sharpe of 2.15 is strong, but it covers only one fold.
Current Activity
Dual-momentum went live on 31 May 2026 with a $10,000 paper allocation. Five consecutive daily runs (June 1–4) have executed zero trades — the strategy is in cash, finding no names in the universe that meet its trend threshold. This isn't alarming; momentum strategies routinely park in cash during directionless markets. It does, however, mean the live track record is still nascent.
Bottom Line
Dual-momentum has a credible thesis and a strong recent fold, but the validation flag is worth respecting. The DSR signal suggests the aggregate backtest Sharpe may be partially artefactual, and Fold 2's drawdown shows the strategy can struggle badly in choppy regimes. Worth watching as live data accumulates — one more positive fold under live conditions would meaningfully strengthen the case for a larger allocation.