The thesis
dual-momentum is a straightforward trend-follower: hold the strongest trending names by 60-day return across a 24-stock large-cap universe, and exit when the trend breaks. The universe spans mega-cap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT) and healthcare (JNJ, UNH), so the strategy expresses its view through selection rather than exotic instruments. It is currently marked live.
Backtest performance
Over 451 days the strategy grew a $10,000 book to $12,349.63 — a 23.5% total return, or roughly 12.5% CAGR. Sharpe came in at 0.95 against a max drawdown of 15.67%. Those are decent headline numbers, but two details deserve scrutiny.
First, the win rate is just 28.79% across 136 trades. That is characteristic of trend-following — many small losing exits punctuated by a handful of large winners — but it means the equity curve leans heavily on a few trades going right. Second, turnover is 2,638%, extremely high churn that racked up $136 in fees. In a higher-cost or higher-slippage environment, that friction would bite harder than the backtest suggests.
Validation: the gate it failed
This is where the caution flag goes up. Walk-forward validation across four folds did not pass. Three of four folds were positive, but the story is uneven:
- Fold 1 (Aug 2024–Jan 2025): +5.85%, Sharpe 1.23
- Fold 2 (Jan–Jul 2025): −7.31%, Sharpe −1.05, 17.15% drawdown
- Fold 3 (Jul–Dec 2025): +25.59%, Sharpe 3.32
- Fold 4 (Dec 2025–May 2026): +13.34%, Sharpe 2.15
Out-of-sample return was a solid 13.34% with a 2.15 Sharpe, and the PSR of 0.893 is encouraging. But the Deflated Sharpe Ratio is only 0.476 — after accounting for the 6 trials run during development, the evidence that this strategy's edge is real rather than lucky is roughly a coin-flip. Fold 2 shows exactly the failure mode momentum fears: a choppy, mean-reverting regime where the strategy bought strength that promptly reversed.
Recent activity: nothing
The live book has been quiet. The last six scheduled runs — Aug 18 through Aug 25 — each report 0 executed, 0 rejected, with the account holding $10,000 in cash and no positions. The trend filter is currently keeping dual-momentum on the sidelines. That is the strategy behaving as designed, not a malfunction: when no name clears the trend threshold, it holds cash. The upside is capital preservation; the cost is that a book earning nothing still carries the opportunity cost of being flat during any rally it misses.
Verdict
dual-momentum has a clean, defensible thesis and a backtest that looks good at a glance. But the low win rate, punishing turnover, an ugly Fold 2, and — most importantly — a DSR below 0.5 with a failed validation gate all argue for treating its live allocation conservatively. Momentum works until the regime turns; this one has already shown us what that looks like. Watch how it re-enters when the trend filter finally fires.