Strategy Thesis
momentum-code is a straightforward large-cap momentum play: at each scheduled run it scans a 24-name universe — mega-cap tech, financials, healthcare, consumer staples, energy, and industrials — and buys the top positive movers, capped per position. No shorts, no leverage, no sector tilts beyond what the momentum signal naturally produces. The thesis is that short-term price leadership in liquid names persists long enough to capture, and that position caps prevent single-name blowups.
Backtest Snapshot
Over 451 days the strategy compounded to +19.76% total return (10.6% CAGR) on a starting equity that reached $11,976 at close. Those are respectable numbers on paper — but context matters.
| Metric | Value |
|---|---|
| Total return | 19.76% |
| CAGR | 10.6% |
| Sharpe ratio | 0.65 |
| Max drawdown | 20.48% |
| Turnover | 92.74% |
| Trades executed | 5 |
A Sharpe of 0.65 is underwhelming relative to the drawdown risk taken. A 20.48% peak-to-trough decline against a large-cap universe that includes defensive names like KO, PG, and JNJ suggests the strategy concentrates hard into high-beta positions at exactly the wrong moments. Turnover near 93% also implies meaningful transaction friction in a live account — though the backtest records only $5 in total fees, the real-world cost will be higher.
Walk-Forward Validation
The four-fold walk-forward picture is more encouraging:
| 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 are positive — a meaningful signal that the strategy is not curve-fitted to a single market regime. The out-of-sample return of +13.71% (Sharpe 1.93) on the most recent fold is the strongest argument in momentum-code's favour. Folds 1, 3, and 4 all show tight drawdowns (≤6.32%) with Sharpe ratios well above 1.0.
Fold 2 is the outlier: a choppy January–July 2025 window where momentum signals degraded and drawdown hit 16.55%. That period coincides with elevated macro uncertainty and sector rotation — exactly the environment where naive momentum strategies struggle.
Validation Gate: Not Yet Passed
Despite the fold consistency, momentum-code has not cleared the platform's validation gate. The Probabilistic Sharpe Ratio (PSR) of 0.811 indicates an 81% probability the strategy's true Sharpe exceeds a benchmark — reasonable, but the platform requires higher confidence. More critically, the Deflated Sharpe Ratio (DSR) of 0.338 adjusts for the six trials run to find this strategy. With multiple configurations tested, the odds of selecting a lucky backtest rise, and the DSR penalises accordingly. Until the DSR clears the threshold, auto-deploy remains blocked.
Recent Live Activity
The last five scheduled runs (June 2–8) executed zero trades — momentum signals either failed to fire or proposed orders were rejected, likely on position-size or price-limit grounds. Portfolio value drifted from ~$9,994 to ~$9,645, a modest mark-to-market decline consistent with broader market softness in that window.
The most recent executed trades were on June 1 (XOM × 13 @ $148.69, NVDA × 8 @ $224.20) and May 31 (BAC × 38, HON × 8, MSFT × 4). The XOM + NVDA pair is an interesting combination — energy and semiconductor momentum running in tandem — while the BAC + HON + MSFT cluster from May 31 reflects broad cyclical leadership.
Bottom Line
momentum-code has real strengths: all folds positive, a strong recent out-of-sample period, and a clean thesis that avoids over-engineering. The risks are equally real: a high overall drawdown, a weak full-period Sharpe, and a DSR that flags potential selection bias across the six trial runs. The path to validation likely requires either a longer live track record that firms up the PSR, or a structural tweak — tighter drawdown controls, a volatility filter on entry — that reduces the max-DD without sacrificing the fold consistency that already exists.