The thesis
Dual-momentum is a straightforward trend-follower: hold the strongest names by 60-day return from a 24-stock large-cap universe (AAPL, MSFT, NVDA, JPM, V, JNJ, XOM and peers), and exit when the trend breaks. It is a well-trodden idea — buy strength, cut weakness — carrying the usual momentum signature of a low hit rate offset by letting winners run. The strategy is live.
Recent activity
The tape has been quiet. Across six scheduled runs between 18 and 25 September, the strategy executed zero trades and rejected zero, sitting on the full $10,000 in cash each day. No open positions, no new entries. For a trend-follower, an all-cash stance is itself a signal: nothing in the universe is trending strongly enough to trigger an entry under its rules. That is disciplined behaviour — but it also means the strategy is currently earning nothing.
Backtest performance
Over 451 days the backtest returned 23.5% (final equity $12,349.63), a 12.52% CAGR, with a Sharpe of 0.95 and a 15.67% max drawdown. The win rate is just 28.79% across 136 trades — low, but characteristic of momentum, where a minority of large winners carries the book. The flag worth raising is turnover: 2,638%. That is heavy churn, and while modelled fees were only $136 with no FX cost, real-world slippage on that volume would likely bite harder than the backtest implies.
Walk-forward validation
Here the picture gets more nuanced, and the headline is that validation did not pass. Across four folds, three were positive:
- 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 averaged 13.34% with a strong 2.15 OOS Sharpe. The probabilistic Sharpe ratio is a healthy 0.893, but the deflated Sharpe ratio — which penalises for the 6 trials run — sits at just 0.476. That deflation is why the gate failed: adjusted for selection effort, confidence that the edge is real is barely a coin flip.
The balanced take
There is a genuine signal here. Three of four out-of-sample windows made money, the OOS Sharpe is respectable, and the strategy behaves as designed — including sitting in cash when nothing trends. But the risks are equally clear: a brutal Fold 2 (−7.31%, its deepest drawdown), a sub-30% win rate that demands patience, punishing turnover, and a deflated Sharpe that keeps it below the validation threshold. Live but unproven is the fair label. Two things are worth watching next: whether it re-enters the market when momentum returns, and whether live fills track the backtest once that turnover meets reality.