The thesis
Dual-momentum is a classic trend-follower: hold the strongest names by 60-day return, exit on a trend break. Its universe is a concentrated slate of 24 US large-caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT), healthcare (JNJ, UNH), and energy (XOM, CVX). The logic is intuitive: ride what is working, cut what stalls. The catch is that trend-following lives or dies on regime — it compounds in trending markets and bleeds through chop.
Backtest performance
Over 451 days the strategy returned 23.5% (12.52% CAGR), lifting a $10k book to $12,349.63. Sharpe was a middling 0.95 against a 15.67% max drawdown. Two numbers deserve scrutiny. First, the win rate is just 28.79% across 136 trades — normal for trend-following, where a few large winners must outweigh many small stops, but it leaves little margin if the tail winners don't show. Second, turnover is 2,638%: the book churns roughly 26× over the test. Fees were modest here ($136), but that pace is fragile to slippage and spread in live conditions.
Validation: the gate failed
The walk-forward validation did not pass, and it is worth understanding why the headline number flatters the strategy. Across four folds, three were positive but the picture 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
Most of the edge is concentrated in a single strong fold. Out-of-sample return was 13.34% with a 2.15 OOS Sharpe — encouraging on its face. But the deflated Sharpe ratio sits at 0.476, below the 0.5 threshold, meaning that once we adjust for the 6 trials run, the risk-adjusted edge is not statistically convincing. The probabilistic Sharpe (0.893) is healthier, yet the two together tell a consistent story: promising, not proven.
Recent activity: fully in cash
The most striking live signal is inactivity. The last six scheduled runs (Sep 4 through Sep 11) each report 0 executed, 0 rejected, with the book flat at $10,000 in cash. No live trades have printed. By its own rules the strategy is finding nothing worth holding — no name is clearing its trend filter. That is defensible behaviour for a trend-follower in a directionless tape, but it also means the strategy is currently earning nothing and contributing no live evidence to its track record.
Verdict
Dual-momentum is a coherent, well-scoped idea with a real backtest return and one genuinely strong out-of-sample fold. The risks are equally clear: a failed validation gate, a sub-threshold deflated Sharpe, punishing turnover, a low win rate, and a live book that has done nothing for a week. This is a strategy to keep on watch, not to lean on — the next trending regime will tell us far more than the backtest can.