The thesis
Dual-momentum is a simple, well-worn idea: hold the strongest trending names by 60-day return, and exit when the trend breaks. Its universe is 24 US large caps spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, JNJ, XOM and the like. There is nothing exotic here, which is exactly the appeal: trend-following has decades of academic support, and a liquid mega-cap universe keeps slippage and fees honest.
Recent activity: idling in cash
The live record is the most striking thing in the data. Across six scheduled runs — 4, 5, 6, 9, 10 and 11 November — the strategy executed zero trades and rejected zero candidates, holding a flat $10,000 in cash each time. No names currently clear its trend filter. That is a defensible posture for a momentum system in a market with no clean leaders: better to sit out than to chase. But it also means the live book has contributed nothing yet, and we have no fresh fills to judge execution against the backtest.
Backtest performance
Over 451 days the backtest 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 scrutiny. The win rate is just 28.79% across 136 trades — low, but characteristic of momentum, where a few large winners carry many small losers. More concerning is turnover of 2,638%: this strategy trades a lot, and at that churn, fees and slippage are a real drag, even if logged costs here were modest ($136 total).
Validation: the strategy did not pass
This is the headline risk. Walk-forward validation across four folds returned a verdict of failed. Three of four folds were positive, and the picture is uneven: fold 1 +5.85%, fold 3 a standout +25.59% (Sharpe 3.32), fold 4 +13.34%. But fold 2 lost 7.31% with a 17.15% drawdown and a Sharpe of −1.05 — a whipsaw period where trend-following got chopped up.
The statistics confirm the caution. Against 6 trials, the deflated Sharpe ratio is 0.476 and the probabilistic Sharpe is 0.893. The out-of-sample return (13.34%) held up reasonably at a 2.15 Sharpe, but the deflated figure says that once we account for how many variations were tried, the edge is not statistically convincing. A single good fold is doing a lot of heavy lifting.
Verdict
Dual-momentum is a clean, interpretable strategy with a respectable headline backtest and a sensible instinct to go to cash when leadership is absent. The risks are equally clear: a failed validation gate, a sub-0.5 deflated Sharpe, punishing turnover, and a concentrated dependence on a single strong fold. For now it is proving its discipline by doing nothing — which is the right call until the numbers, and the trend, give it a reason to act.