Thesis & Design
momentum-code follows a simple, legible premise: at each scheduled run, identify the top positive movers within a curated 24-name large-cap universe and buy them with per-position caps to contain concentration risk. The universe spans six sectors — technology (AAPL, MSFT, GOOGL, NVDA), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH, PFE, ABBV), consumer (PG, KO, WMT, COST, MCD, NKE, HD), energy (XOM, CVX), and industrials (CAT, HON, DIS) — offering broad exposure while keeping the signal focused on near-term price strength.
The strategy deployed live on 2026-05-31 with a $10,000 allocation.
Backtest Snapshot
Over 451 days, momentum-code returned 19.76% (10.6% CAGR), bringing a hypothetical $10,000 to $11,976. Transaction costs were negligible ($5 total). The headline Sharpe of 0.65 is modest but not alarming for a momentum approach in a mixed-regime period. More notable is the 20.48% maximum drawdown — a figure that deserves respect in any live deployment, particularly on a $10,000 book.
Turnover reached 92.74%, suggesting the strategy rotates nearly its full book on a rolling basis. Only five trades are recorded in the backtest period, indicating a low-frequency execution cadence.
Walk-Forward Validation
The four-fold walk-forward analysis is the most informative lens on strategy robustness:
| Fold | Period | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +15.38% | 2.47 | 6.12% |
| 2 | Jan 2025 – Jul 2025 | +3.27% | 0.46 | 16.55% |
| 3 | Jul 2025 – Dec 2025 | +12.18% | 2.31 | 5.21% |
| 4 | Dec 2025 – May 2026 | +13.71% | 1.93 | 6.32% |
All four folds finished positive — a meaningful consistency signal. Three of the four posted Sharpe ratios above 1.9 with drawdowns under 7%. The final fold is the most consequential: as the true out-of-sample period, its 13.71% return and 1.93 Sharpe represent unoptimised performance and are genuinely encouraging.
Fold 2 is the outlier. A 3.27% return, 0.46 Sharpe, and 16.55% drawdown reveal a regime — likely the early-2025 volatility window — where the momentum signal meaningfully degraded. This is the scenario to stress-test.
Despite the positive fold sweep, validation did not pass. The Deflated Sharpe Ratio (DSR) of 0.338 is the deciding flag: after adjusting for six strategy trials, the observed Sharpe does not clear statistical significance thresholds. The Probabilistic Sharpe Ratio (PSR) of 0.811 is more favourable but insufficient to override the DSR verdict. The strategy enters live deployment under a yellow flag, not a green one.
Live Activity
Two days in, momentum-code has executed five trades: BAC (38 shares @ $51.60), HON (8 @ $237.86), and MSFT (4 @ $450.24) on deployment day; then XOM (13 @ $148.69) and NVDA (8 @ $224.20) on June 1. One order in the second run was rejected — likely a cash or position-sizing constraint. Portfolio stands at $10,033.28 with $608.79 in cash.
The reported win rate of 0% reflects no closed positions yet; no round-trip P&L has been realised.
Risks to Watch
- DSR failure is the primary concern. With a DSR of 0.338 across six trials, there is a real probability the backtest Sharpe is partly an optimisation artefact rather than a persistent edge.
- Drawdown tolerance: the 20.48% historical max drawdown, and Fold 2's 16.55% intra-period print, show this strategy can test conviction during choppy regimes.
- Thin live history: five trades over two days is noise. Meaningful live performance data will take months to accumulate at the current execution cadence.
- Regime dependency: the Fold 1/3/4 outperformance likely reflects trending market conditions. Mean-reverting or high-volatility environments — Fold 2's territory — represent the strategy's natural stress point.
momentum-code is a clean, interpretable first live strategy. The OOS numbers are a legitimate green shoot; the DSR flag is a legitimate caution. Both deserve to stay in view.