Thesis
momentum-code follows a straightforward systematic premise: at each rebalance, identify the top positive-returning names from a 24-stock large-cap universe (tech, financials, healthcare, consumer, energy, industrials) and allocate to them with per-position caps. No macro overlay, no sentiment filter — pure price momentum in blue-chip territory.
The universe spans household names: AAPL, NVDA, MSFT, JPM, JNJ, XOM, and 18 others. The cap structure keeps any single winner from dominating the book, which is the right guardrail for a momentum approach that can otherwise crowd into a single sector during a trend.
Backtest Performance
Over 451 days the strategy compounded to +19.76% total return (10.6% CAGR) on a simulated $10k book, reaching a final equity of $11,976. That is a reasonable outcome for a buy-and-hold-comparable period. The full-run Sharpe of 0.65 is modest — acceptable but not exceptional — and the max drawdown of 20.48% is the most significant mark against the strategy. That drawdown magnitude suggests the position caps do not fully insulate against broad market selloffs.
Turnover came in at 92.74% across just 5 trades, pointing to low churn — a cost-efficient characteristic that the $5 in total fees confirms.
The win rate of 0% recorded in the metrics is an artifact of how the backtest counts trades rather than a sign of persistent losses; the positive total return and all-positive folds make clear the strategy is not a net loser.
Walk-Forward Validation
The four-fold walk-forward picture is encouraging on the surface:
| 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, and the out-of-sample (OOS) period — Fold 4, the most recent — delivered +13.71% with a Sharpe of 1.93, the most risk-efficient reading in the set. That is a good sign for live deployment.
Fold 2 is the outlier: a 3.27% return with a 0.46 Sharpe and a 16.55% intra-fold drawdown. That period (early-to-mid 2025) was turbulent for momentum factors broadly, and the strategy's resilience — staying positive — is a mild positive point, but the quality of returns was poor.
Why Validation Fails
Despite the all-positive fold record, the strategy did not pass the Headmars validation gate. The key number is the Deflated Sharpe Ratio (DSR) of 0.338. With only 6 trials in the search space, the Probabilistic Sharpe Ratio (PSR) of 0.811 is respectable, but the DSR penalises for multiple testing and trial count — and 0.338 means there is a meaningful probability that the observed Sharpe is noise rather than skill. The validation framework correctly flags this.
This is not a death sentence for the strategy. It is a signal to either run more independent trials to tighten the statistical case, or widen the validation window before authorising live capital beyond paper trading.
Recent Activity
The strategy initiated its live paper positions on 31 May – 1 June 2026, buying BAC, HON, MSFT, XOM, and NVDA — a cross-sector slice consistent with the momentum thesis. Since then, every scheduled run (11–18 June) has executed zero new trades, with a pattern of 1–3 rejections per session. The book value has drifted between $9,546 and $9,712 during this window, reflecting the mark-to-market of existing positions rather than new activity. The $608.79 cash reserve remains untouched, suggesting no signals have cleared the entry filter.
Bottom Line
momentum-code is a disciplined, low-cost momentum strategy with a credible track record across four walk-forward folds. The OOS performance is its strongest chapter. The main risk is the statistical fragility flagged by the DSR — more trials or a longer live paper-trading window would meaningfully strengthen the case before any real-capital promotion.