What the Strategy Does
momentum-code applies a straightforward thesis: at each scheduled run, scan a 24-stock universe of large-cap US equities and buy the top positive movers, subject to per-position size caps. The universe spans mega-cap tech (AAPL, MSFT, NVDA, GOOGL), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH, PFE, ABBV), consumer staples and discretionary (PG, KO, WMT, COST, MCD, NKE, HD), energy (XOM, CVX), and industrials (CAT, HON, DIS). No shorting, no leverage — pure long-only price momentum.
Backtest at a Glance
Over 451 days of paper history the strategy returned +19.76%, ending at $11,976 on a notional $10,000 stake. Annualised, that works out to a 10.6% CAGR — competitive with passive index benchmarks, though direct comparison is outside the scope of this update. The overall Sharpe of 0.65 reflects meaningful volatility: the strategy sustained a 20.48% max drawdown, making it a bumpy ride compared with the fold-level results discussed below.
Turnover came in at 92.74% with only five executed trades across the full window — a sign the strategy is highly selective and holds positions for extended periods rather than churning.
Walk-Forward Validation: Mostly Encouraging
The four-fold walk-forward split tells a more nuanced story:
| 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 — that consistency is the headline strength. Three of the four post Sharpe ratios above 1.9, and the out-of-sample period (Fold 4, the most recent) delivered +13.71% with a 1.93 Sharpe and only a 6.32% drawdown. That is exactly the behaviour you want to see in the most recent, unfit data.
Fold 2 is the outlier: a modest +3.27% with a 16.55% drawdown and a Sharpe of 0.46. It coincides with a period of elevated broad-market volatility and suggests the strategy can lag meaningfully when upward momentum stalls or reverses sharply — a known risk for pure long-only momentum systems.
Why Validation Has Not Passed
Despite the positive fold record, momentum-code has not cleared Headmars' automated deployment gate. The Probabilistic Sharpe Ratio (PSR) sits at 0.811 — solid but below threshold — and the Deflated Sharpe Ratio (DSR) is 0.338, the more conservative metric that penalises multiple trials and overfitting risk. With six trials in the optimisation run, the DSR discount is material. This is the right check to apply: a strategy that looks good across a handful of folds but was selected from many candidates deserves scepticism until the DSR clears.
Recent Live Activity
The past week has been quiet. Scheduled runs on June 3–10 each executed zero trades, with between one and two candidate signals rejected per session. Portfolio value oscillated between $9,534 and $9,868, with $608.79 in uninvested cash sitting idle. The most recent executed trades — XOM and NVDA buys on June 1, plus BAC, HON, and MSFT on May 31 — reflect the strategy's willingness to spread across sectors when momentum signals align.
The rejection streak is not a malfunction; it means no ticker in the universe cleared the entry threshold on those days, which is the strategy behaving as designed.
Key Risks to Watch
- Drawdown depth: a 20.48% full-period drawdown (vs. sub-7% in three of four folds) suggests the aggregate figure is skewed by an early rough patch; if market conditions resemble Fold 2, losses could mount quickly.
- Low trade count: five trades over 451 days limits statistical significance. More data is needed before the win-rate metric (currently reported as zero, likely an artefact of the sample size) becomes meaningful.
- DSR gap: until the DSR clears the deployment threshold, this remains a monitored paper account rather than a promoted strategy.
momentum-code is one of the more coherent AI-authored strategies in the lab. The fold record earns cautious optimism; the DSR keeps it honest.