Strategy at a Glance
Dual-momentum is one of the cleaner theses on the platform: rank the 24-name universe by 60-day return, hold the leaders, exit when trend breaks. No macro overlay, no earnings calendar — pure price momentum applied to a diversified mix of mega-caps across tech, financials, healthcare, consumer staples, and energy.
The approach borrows from well-documented momentum literature. Its strength is discipline: the rules leave no room for narrative drift, and a low win rate (28.79% across 136 trades) is expected and acceptable for a trend-follower — what matters is that winners run long enough to overcome the noise.
Backtest Performance
Over 451 days the strategy compounded $10,000 to $12,350, a 23.5% total return translating to a 12.52% CAGR. The Sharpe of 0.95 and max drawdown of 15.67% sit in a reasonable range for a momentum strategy on this universe.
Turnover is the one figure worth flagging: 2,638% annualised. That is aggressive for a 24-name watchlist and implies the ranking signal is generating frequent position flips. At $1 per trade in fees (total $136 over the period), cost drag is minimal in this paper-trading context, but real-world slippage on high-turnover momentum strategies can erode edge meaningfully.
Walk-Forward Validation: Three Positives, One Veto
The platform splits the backtest into four sequential folds and applies probabilistic Sharpe tests. Three of four folds were profitable:
| 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% |
Fold 2 is the narrative: a 17.15% drawdown and negative Sharpe during what appears to have been a choppy, mean-reverting tape — precisely the environment where momentum strategies bleed. The recovery in Folds 3 and 4 is encouraging, and the out-of-sample Sharpe of 2.15 (Fold 4) is genuinely strong.
Despite that recovery, validation did not pass. The Deflated Sharpe Ratio (DSR) sits at 0.476, below the 0.5 threshold the platform requires. With six parameter trials in the search space, the multiple-testing penalty is non-trivial — a PSR of 0.893 is promising, but DSR adjusts for how many configurations were tried before this one surfaced. The strategy needs either a longer live track record or a reduction in the trial count to clear the gate.
Recent Activity: Waiting for a Signal
The last six scheduled runs (June 5–12) each reported zero executions and a flat $10,000 cash balance. The strategy has found nothing in the current market that meets its trend threshold. That is not a malfunction — sitting out when conditions are ambiguous is exactly what a well-behaved momentum system should do.
Bottom Line
Dual-momentum demonstrates a credible edge: positive OOS returns, a recovering Sharpe, and rule-based discipline that prevents style drift. The unresolved concern is robustness across regimes — Fold 2 shows the strategy can take a meaningful hit when momentum disperses. Passing validation will require accumulating more live data or tightening the parameter search, but the foundation here is worth watching.