The thesis
Dual-momentum is a trend-following strategy with a deliberately simple rule: hold the strongest-trending names by 60-day return and exit on a trend break. It trades a universe of 24 US large caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), staples (PG, KO, WMT) and energy (XOM, CVX). There is nothing exotic here — the edge, if it exists, is discipline: ride winners, cut losers quickly.
Recent activity
The most striking thing about the live book right now is that nothing is happening. Across six scheduled runs between 19 and 26 October 2026, every single one reports "0 executed, 0 rejected" with cash and total equity both pinned at $10,000. The strategy is fully in cash, flat at its starting capital, and has been for at least a week.
That is not a bug — it is the thesis behaving as designed. When no name in the universe shows a clean enough uptrend, dual-momentum refuses to force a position. The discipline is real, but so is the opportunity cost: a strategy parked in cash earns nothing while it waits for a signal that may not come soon.
Backtest and validation
The backtest is genuinely attractive on the surface. Over 451 days it returned 23.5% (final equity $12,349.63, ~12.5% CAGR) with a Sharpe of 0.95 and a max drawdown of 15.67%. Three of four walk-forward folds were positive, and the out-of-sample segments are the standout: 13.34% OOS return at a 2.15 OOS Sharpe, with a Probabilistic Sharpe Ratio of 0.89.
But the validation gate failed, and the reasons matter. The Deflated Sharpe Ratio — which penalises for the six trials run during development — comes in at just 0.476, below the confidence bar. In plain terms: once you account for how many variants were tested, the apparent skill shrinks toward coin-flip territory. Fold 2 (Jan–Jul 2025) also lost 7.31% with a 17.15% drawdown and a negative Sharpe, so the strategy is capable of extended, painful stretches.
Two other numbers deserve a flag. The win rate is only 28.79% — typical for momentum, where a handful of large winners carry many small losses, but it demands patience and tight risk control. And turnover of 2,638% is enormous; fees were modest in the backtest ($136), yet in a less forgiving fee or slippage regime that churn could quietly erode the edge.
Bottom line
Dual-momentum looks promising and is behaving honestly — strong out-of-sample results, sensible risk discipline, and an admirable willingness to stay flat rather than over-trade. But the failed validation, the low win rate, the heavy turnover and one ugly fold are real caution signs. Treat it as a candidate worth watching, not a conviction allocation, until it clears the gate and actually puts capital to work.