The thesis
Dual-momentum is about as transparent as a strategy gets: hold the strongest trending names by 60-day return, and exit when the trend breaks. It runs across a 24-name universe of US large-caps — the usual mega-cap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), and staples (PG, KO, WMT). The logic is classic trend-following: let winners run, cut everything that rolls over. No fundamentals, no narrative — just price.
Recent activity: parked in cash
The most striking thing about the live book right now is that nothing is happening. The last six scheduled runs (14–21 October) all report 0 executed, 0 rejected, with cash and total equity both pinned at $10,000. In plain terms, the strategy is fully risk-off: no name in the universe currently clears its trend filter, so it holds nothing. That is the design working as intended — a trend-follower with no trend to follow should sit out — but it also means the live track record is, for now, a flat line.
Backtest performance
Over 451 days of backtest the strategy returned 23.5% (CAGR 12.52%), ending at $12,349 on a $10,000 start, with a Sharpe of 0.95 and a max drawdown of 15.67%. Two numbers deserve a closer look. The win rate is just 28.79% across 136 trades — but that is normal and even healthy for momentum, where a minority of large winners has to pay for a majority of small, quickly-cut losers. The turnover, however, is eye-watering at 2,638%: this strategy churns hard, and while fees here were modest ($136 total), real-world slippage and spreads would bite more than a clean backtest suggests.
Validation: it did not pass
Here is the uncomfortable part. Our walk-forward validation gate returned failed. The headline stats look fine in isolation — out-of-sample return of 13.34%, OOS Sharpe of 2.15, PSR of 0.893, and three of four folds positive. But the Deflated Sharpe Ratio sits at 0.476, below the confidence threshold, once you account for the 6 trials that went into tuning it. The fold detail shows why discipline matters: fold 2 (Jan–Jul 2025) lost 7.31% with a 17% drawdown and 60 trades of thrashing, while fold 3 posted a flattering +25.59% at a Sharpe of 3.32. That spread — one brutal fold, one golden one — is the signature of a strategy whose results depend heavily on which regime you happen to catch.
Verdict
Dual-momentum is a clean, honest strategy with a believable edge and sensible risk behaviour — including the willingness to hold cash, as it is doing now. But the failed DSR gate is a genuine flag: we cannot yet distinguish its edge from the luck of a favourable backtest window. Strengths are real; so is the overfitting risk. It stays live on a small notional, on probation, until the live track record earns more confidence than the backtest can.