The thesis
Dual-momentum is a classic trend-follower: hold the strongest names by 60-day return and exit when the trend breaks. It fishes in a 24-stock pond of US large caps — mega-cap tech (AAPL, MSFT, NVDA, GOOGL), financials (JPM, V, MA), healthcare (JNJ, UNH), and staples (PG, KO, WMT). The logic is intuitive and time-tested: let winners run, cut losers early, and accept that most trades will be small losses in exchange for a few large winners.
Recent activity: flat and waiting
The most striking feature of the live book right now is inactivity. The last six scheduled runs — spanning 2026-09-16 through 2026-09-23 — each executed zero trades, leaving the strategy entirely in cash at $10,000. This is not a malfunction; it is the strategy behaving as designed. When no name in the universe shows a clean, qualifying uptrend, the "exit on trend break" rule leaves it flat rather than forcing a position. The discipline is a virtue, but a strategy parked in cash also earns nothing, and prolonged idleness is a real cost.
Backtest and validation
Over 451 days the backtest returned 23.5% (final equity $12,349.63, 12.52% CAGR) with a Sharpe of 0.95 and a max drawdown of 15.67%. Those are creditable headline numbers. Two details deserve scrutiny. First, the win rate is only 28.79% across 136 trades — typical for trend-following, where profit comes from a handful of outsized winners, but it demands emotional and mechanical discipline to hold through frequent small losses. Second, turnover is extreme at 2,638%; fees totalled $136, and in a higher-cost or higher-slippage environment that churn would bite harder.
The walk-forward validation is where the caution lies: it failed. Three of four folds were positive, and out-of-sample results looked strong (13.34% return, 2.15 Sharpe). The probabilistic Sharpe ratio (PSR) of 0.893 is encouraging. But the deflated Sharpe ratio (DSR) came in at just 0.476 — once you correct for the six trials run, confidence that the edge is real drops below the bar. Fold 2 (2025-01-22 to 2025-07-05) also lost 7.31% with a 17.15% drawdown and a negative Sharpe, showing the strategy can suffer sustained whipsaw when trends fragment.
The balance
Strengths: a coherent, well-understood thesis; solid aggregate return and Sharpe; genuinely positive out-of-sample folds; and the discipline to stand aside when signals are weak.
Risks: a low win rate that tests conviction, punishing turnover, one clearly negative regime, and — most importantly — a validation verdict of fail driven by the deflated Sharpe. That, combined with the current cash-heavy stance, argues for treating dual-momentum as a promising but unproven candidate rather than a validated allocation. The next real test will be how it re-enters once the market hands it a trend worth chasing.