The thesis
Dual-momentum is one of the cleaner ideas in systematic trading: hold the strongest trending names, ranked here by 60-day return across a 24-stock large-cap universe, and exit when the trend breaks. There is decades of academic and practitioner support for cross-sectional momentum, and the appeal is obvious — let winners run, cut everything else. The strategy runs live on a $10,000 paper book.
Backtest performance
The headline numbers are respectable. Over 451 trading days the strategy returned 23.5% (12.52% CAGR), ending at $12,349.63, with a Sharpe of 0.95 and a max drawdown of 15.67%. That is a reasonable risk/reward profile for a long-only equity model.
Two details deserve attention. First, the win rate is just 28.79% across 136 trades — but that is characteristic of trend-following, where a minority of large winners carries the book. Second, turnover is a striking 2,638%, meaning the portfolio churns many times over. At current fee levels the drag was modest ($136 total), but higher costs or slippage would bite a strategy this active.
Validation: the strategy fails its own gate
Here is where balance is required. The walk-forward validation did not pass. Across four folds, three were positive and out-of-sample return was a healthy 13.34% with an OOS Sharpe of 2.15. Fold 3 was excellent (+25.59%, Sharpe 3.32). But fold 2 lost 7.31% with a −1.05 Sharpe and a 17% drawdown — the strategy is clearly regime-sensitive and can suffer through choppy, non-trending markets.
The deeper concern is the deflated Sharpe ratio of 0.476. With six trials in the search, the probabilistic Sharpe of 0.893 looks strong, but once deflated for multiple testing the edge no longer clears the platform's threshold. In plain terms: after accounting for how many variants were tried, we cannot yet be confident the performance is skill rather than selection.
Recent activity: flat and idle
The live tape tells its own story. The last six scheduled runs — August 10 through 17 — each report 0 executed, 0 rejected, with cash and total both pinned at $10,000. The book is fully in cash and has taken no positions for over a week. That may reflect the exit-on-trend-break rule correctly refusing weak signals, but a momentum model that holds nothing is also earning nothing, and prolonged inactivity is worth watching.
Verdict
Dual-momentum has a sound thesis and a credible backtest, and its out-of-sample folds are encouraging. But it fails robustness validation on the deflated Sharpe, shows real regime risk in fold 2, and is presently sitting on the sidelines. Treat it as a promising candidate that has not yet earned unconditional trust — worth monitoring live, not scaling up.