Thesis
momentum-code follows a classic price-momentum playbook: at each scheduled run it scans a 24-name universe of large-cap US equities — spanning mega-cap tech (NVDA, MSFT, AAPL), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH), consumer staples, and industrials — and buys the top positive movers subject to a per-position size cap. The logic is deliberate in its simplicity: ride near-term winners, limit concentration, repeat.
Backtest Snapshot
Over 451 calendar days the strategy compounded to a 19.76% total return (10.6% annualised), turning a hypothetical $10,000 into $11,976. Friction was negligible — $5 in total fees, no FX costs on a USD-denominated book. The concerning figures sit on the risk side: a Sharpe ratio of 0.65 is below the 1.0 threshold most practitioners consider acceptable for a standalone strategy, and a 20.48% maximum drawdown is substantial relative to those returns. A drawdown of that magnitude over a ~15-month window means the strategy would have tested the patience — and the stop-loss policies — of most investors before recovering.
The reported win rate of 0% across five trades reflects the paper-trading lifecycle rather than actual losses: all five positions are open buys with no realised exits recorded yet, so the metric is effectively undefined rather than bearish.
Cross-Validation: Promising Folds, a Gate That Did Not Open
The four-fold walk-forward results are the most encouraging part of the picture. All four folds produced positive returns:
| Fold | Period | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +15.38% | 2.47 | 6.12% |
| 2 | Jan – Jul 2025 | +3.27% | 0.46 | 16.55% |
| 3 | Jul – Dec 2025 | +12.18% | 2.31 | 5.21% |
| 4 | Dec 2025 – May 2026 | +13.71% | 1.93 | 6.32% |
Folds 1, 3, and 4 show notably strong risk-adjusted performance (Sharpe ≥ 1.93). Fold 2 stands out as the weak link — a modest 3.27% gain with a 16.55% drawdown and a Sharpe of just 0.46, coinciding with a period of elevated macro volatility in early-to-mid 2025. The out-of-sample (OOS) return of 13.71% with a Sharpe of 1.93 is the most forward-looking signal and reads well.
Despite this, the strategy failed the automated validation gate. The Probabilistic Sharpe Ratio (PSR) came in at 0.811 — an 81% probability the true Sharpe clears a benchmark — but the Deflated Sharpe Ratio (DSR) of 0.338 is the culprit. With six trials in the search space, the DSR penalises the observed Sharpe for multiple-testing bias and concludes there is insufficient statistical confidence to rule out lucky parameter selection. That is the right call: 6 parameter trials is a modest search, but 5 total trades is a thin evidence base.
Recent Live Activity
The strategy's last executed trades were a cluster on 31 May – 1 June 2026: buys in BAC, HON, MSFT, XOM, and NVDA. Since then — six scheduled runs across 5–12 June — every candidate trade has been rejected (1–2 rejections per run) and the portfolio has sat on $608.79 cash with total mark-to-market ranging $9,534–$9,786. The strategy is holding its positions and waiting for qualifying movers to emerge; the flat cash balance suggests no position was trimmed or exited.
Risks to Watch
- Drawdown tolerance: the 20.48% backtest max drawdown paired with a 0.65 Sharpe implies the strategy earns its returns unevenly and could test resolve during choppy periods (see Fold 2).
- Low trade count: five live trades is statistically sparse. Any performance read at this stage is noise-dominated.
- Validation failure: until DSR clears the gate — typically requiring more trials resolved with consistent outcomes — the strategy should be treated as exploratory, not deployable at scale.
- Turnover: at 92.74% annual turnover the strategy rotates the book aggressively; in a live, non-zero-commission environment, friction costs would meaningfully compress net returns.
Bottom Line
momentum-code shows genuine promise — four consecutive positive out-of-sample folds and a strong OOS Sharpe are not nothing. But the validation gate exists precisely for cases like this: good-looking numbers on a thin trade count and a punishing drawdown profile. The strategy earns monitored live status, not capital commitment. The next 30–60 days of live runs, and whether it can navigate a volatile fold the way it handled Folds 1, 3, and 4, will tell us more than any backtest can.