Strategy Thesis
momentum-code applies a straightforward premise: at each scheduled run, scan a 24-name universe of large-cap U.S. equities — spanning tech, financials, healthcare, consumer staples, energy, and industrials — and buy the top positive movers, subject to a per-position size cap. No complex signal stacking, no sector overweighting. The thesis is that recent relative strength in liquid, well-covered names tends to persist over short horizons, and that capping position size keeps concentration risk in check.
Backtest Performance
Over 451 days of backtested history, momentum-code returned 19.76% on a starting notional, with a CAGR of 10.6% and a Sharpe ratio of 0.65. The maximum drawdown came in at 20.48% — meaningful, but not unusual for a momentum strategy that deliberately stays invested in moving names.
Turnover was high at 92.74%, which is consistent with the strategy's design: it chases current movers rather than holding for the long term. Total fees were minimal ($5 flat), reflecting the paper-trading environment.
The win rate is reported at 0% with only 5 completed trades in the backtest period. That figure likely reflects how the metric is being calculated — with so few closed round-trips, the stat carries almost no statistical weight and should not be read as a signal of poor trade quality.
Walk-Forward Validation
The four-fold walk-forward 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 were positive — a meaningful result across diverse market regimes. Three of the four posted Sharpe ratios above 1.9, suggesting the strategy can deliver risk-adjusted returns when momentum conditions are present. Fold 2 is the outlier: a 3.27% return with a 0.46 Sharpe and a 16.55% drawdown, pointing to a period where the market's cross-sectional momentum signal was weaker or more volatile.
Despite the positive fold record, the strategy did not pass validation. The Deflated Sharpe Ratio (DSR) of 0.338 — which adjusts for the number of trials tested (6 in this run) — falls well below the 0.95 threshold typically required to declare statistical robustness. The Probabilistic Sharpe Ratio (PSR) of 0.811 is more encouraging but still short. This is the honest challenge of any systematic strategy developed with limited trade history: the signal may be real, but the sample is too thin to prove it definitively.
Recent Activity: June Quiet Period
The past week of scheduled runs (June 9–16) tells a consistent story: zero executed trades, 1–3 rejections per session. Portfolio value has fluctuated between $9,534 and $9,785 with $608.79 in cash sitting idle. The strategy's last real activity was a five-trade burst on May 31 – June 1, adding positions in BAC, HON, MSFT, NVDA, and XOM — a diversified cross-sector entry that reflected the momentum scan's output at that time.
The June inactivity is not a malfunction. It means the universe's top movers either fail the filter criteria (no sufficiently positive day) or hit the position cap because existing holdings are already at size. In choppy or low-dispersion markets, momentum strategies naturally go quiet.
Strengths and Risks
Strengths: Simple, auditable thesis. Positive across all four walk-forward folds. High-Sharpe performance in Folds 1, 3, and 4 (the most recent fold) suggests the edge is current. Low fees due to disciplined entry rules.
Risks: The 20.48% max drawdown in full backtest is not trivial — Fold 2 alone showed 16.55%. High turnover (92.74%) means performance is sensitive to entry timing. The DSR failure is a real flag: with only 5 historical trades, any attribution of skill over luck remains premature. June's rejection streak also highlights how dependent execution is on daily dispersion in the underlying universe.
momentum-code is a strategy worth watching. It has not yet earned a clean validation stamp, but its fold consistency and recency of strong Sharpe performance make it a credible candidate to revisit as the trade log deepens.