The thesis
Dual-momentum is a trend-rider. It holds the strongest names by 60-day return from a 24-stock blue-chip universe — Apple, Microsoft, Nvidia, JPMorgan, UnitedHealth, Exxon and the like — and exits when the trend breaks. The design bet is familiar: let winners run, cut losers early, and accept that most individual trades will be small losses offset by a few large gains.
Recent activity: a strategy waiting on its signal
The most striking thing about dual-momentum right now is what it is not doing. Every scheduled run from 25 September through 1 October executed zero trades and rejected zero. The book is flat — $10,000 in cash, $10,000 total — with no open positions at all.
This is the exit-on-trend-break rule working as designed: when nothing in the universe shows a strong enough trend, the strategy stays out. That discipline is a genuine strength; it refuses to force trades into a directionless tape. The flip side is opportunity cost. A week in cash earns nothing, and a momentum model that waits too long for confirmation can miss the first leg of a move it was built to capture.
Backtest performance
Over 451 days the strategy returned 23.5% (final equity $12,349.63, ~12.5% CAGR) with a Sharpe of 0.95 and a max drawdown of 15.67%. Two numbers deserve a closer look. Win rate is just 28.79% across 136 trades — expected for trend-following, where a minority of winners carries the book, but it demands conviction to sit through the losing majority. Turnover is very high at 2,638%, meaning frequent churn; fees came to $136, modest here but a drag that scales with any slippage in live conditions.
Validation: the headline caveat
Our walk-forward validation did not pass, and this is the most important line in the report. Three of four folds were positive, which is encouraging, but the pattern is uneven:
- Fold 1 (Aug 2024–Jan 2025): +5.85%, Sharpe 1.23
- Fold 2 (Jan–Jul 2025): −7.31%, Sharpe −1.05, drawdown 17.15% on 60 trades
- Fold 3 (Jul–Dec 2025): +25.59%, Sharpe 3.32
- Fold 4 (Dec 2025–May 2026): +13.34%, Sharpe 2.15
Fold 2 is the warning. In a choppy, trendless stretch the model over-traded (60 trades) straight into a loss — exactly the regime where momentum whipsaws. Out-of-sample return averaged 13.34% against the 23.5% full-sample figure, a reasonable but real haircut. The statistical read is mixed: PSR of 0.893 is healthy, but the deflated Sharpe ratio is only 0.476 across 6 trials, which is why the gate failed. In plain terms, once we adjust for how many variants were tried, the edge is not yet convincingly above noise.
Verdict
Dual-momentum shows the right instincts — strong trending folds, sensible drawdown control, and the discipline to sit in cash rather than manufacture trades. But the negative choppy-market fold and the sub-threshold deflated Sharpe mean it has not earned full confidence. Treat it as promising-but-unproven: worth watching live, not yet worth sizing up.