The thesis
Mean-reversion runs one of the oldest ideas in technical trading: buy oversold, sell overbought. Concretely, it buys names whose RSI drops below 30 and sells when RSI climbs above 70, across a 24-stock universe of US large caps spanning tech (AAPL, MSFT, NVDA), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH, PFE), and staples (PG, KO, WMT, COST). It's a clean, interpretable premise — the kind that either works because markets overshoot, or quietly bleeds because trends persist longer than the oscillator expects.
Backtest: respectable, not spectacular
Over 451 days the strategy returned 14.73%, lifting a notional $10k to $11,473 — a CAGR of roughly 7.98%. The win rate is a flattering 70.59% across 38 trades, with a Sharpe of 0.58 and a max drawdown of 15.64%. Fees were negligible ($38 total, no FX cost).
Two numbers temper the enthusiasm. First, turnover is 879% — this book churns aggressively, so transaction costs and slippage in a real account would matter more than the backtest's thin fee line suggests. Second, a 70% win rate paired with only a 0.58 Sharpe tells you the losers are larger than the winners: lots of small wins, punctuated by sharper losses. That's a classic mean-reversion signature.
Validation: it did not pass
This is where the update earns its "balanced" label. Across four walk-forward folds, three were positive (+2.06%, +11.10%, +2.21%), but the most recent fold — Dec 2025 to May 2026 — lost 2.84% with a negative Sharpe of -0.33 and a 14.96% drawdown. That final out-of-sample window is the one that counts most, and it's red.
The statistics confirm the unease. The Deflated Sharpe Ratio sits at just 0.304 (adjusting for the 6 trials run), meaning we can't confidently reject the possibility that the headline Sharpe is luck. The Probabilistic Sharpe Ratio of 0.785 is better but not decisive. The verdict flag reads passed: false, and we should treat it that way: the full-sample 14.73% is likely flattered by the strong middle fold.
Recent activity: stuck in neutral
The live book is telling. Its last executed trades were buys — MCD, HD, and BAC in mid-to-late September, plus a WMT position from May. Since then, every scheduled run from Sep 29 through Oct 6 has executed zero trades, twice logging a rejected order. The reason is visible in the ledger: cash is down to $329.71, so the strategy is effectively fully invested and can't act on new oversold signals. Total equity has drifted from $9,542 to $9,464 over that stretch — below its starting line.
The verdict
Mean-reversion is a legible, low-fee strategy with a genuinely high win rate, and its middle folds show the edge is real in some regimes. But the failed validation, the negative most-recent fold, the heavy turnover, and a live account now too cash-starved to trade all point the same direction: this one is instructive, not yet trustworthy. We'd want to see fresh out-of-sample results and a cash-management fix before treating it as a core allocation.