Strategy at a Glance
momentum-code runs a straightforward mandate: at each scheduled interval, identify the top positive price-movers within a curated 24-stock large-cap universe — spanning technology, financials, healthcare, consumer staples, and energy — and enter positions capped per holding. The universe favors liquidity and household names (AAPL, NVDA, MSFT, XOM, JPM among them), which keeps slippage risk low but also limits the edge that pure momentum typically finds in smaller, less-followed names.
Backtest Performance
Over 451 days, the strategy produced a 19.76% total return and an annualized CAGR of 10.6%. Those headline numbers are respectable, but the risk profile deserves scrutiny.
- Sharpe ratio: 0.65 — adequate, but below the 1.0 threshold most systematic frameworks require before live deployment.
- Max drawdown: 20.48% — meaningful for a strategy anchored to blue-chip names. A one-in-five decline in paper value would test conviction in any regime.
- Turnover: 92.74% — the portfolio rotates aggressively. With only $5 in simulated fees, real-world friction (spreads, market impact) will erode this edge at scale.
Walk-Forward Validation
The strategy was tested across four sequential, non-overlapping folds covering August 2024 through May 2026. All four folds closed positive — a consistency worth noting.
| 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% |
Fold 2 is the clear outlier: a modest 3.27% gain paired with a 16.55% intra-period drawdown and a near-flat Sharpe of 0.46. That period coincided with elevated macro volatility, pointing to a real vulnerability during sharp rotations or risk-off regimes. Folds 1, 3, and 4 tell a more encouraging story, each posting double-digit returns with contained drawdowns.
Despite the clean sweep of positive folds, the formal validation gate did not pass. The Probabilistic Sharpe Ratio (PSR) of 0.811 is healthy — implying roughly 81% confidence the strategy's true Sharpe is positive — but the Deflated Sharpe Ratio (DSR) of 0.338, adjusted for six total trial runs, falls short of the threshold required to dismiss selection bias. In plain terms: with multiple strategies tested, at least one will look good by chance, and this result hasn't cleared that bar yet.
Live Activity: Early July 2026
Since the initial entries in late May and early June (XOM, NVDA, BAC, HON, MSFT), the book has been static. Six consecutive daily runs from July 2–9 logged zero executed trades, with one to two rejected signals per session. The portfolio sits nearly fully invested, with roughly $609 in cash against a total value oscillating between $9,537 and $9,663.
Rejections rather than silence suggest the engine is actively scanning — candidates are surfacing, but position caps or momentum thresholds are preventing new entries. This is the strategy behaving as designed: it will not chase tops when existing holdings already fill the allowed allocation.
Strengths and Risks
Strengths: Every walk-forward fold closed green; the most recent out-of-sample period delivered the strategy's best risk-adjusted result (Sharpe 1.93); the universe is highly liquid; fees at current scale are negligible.
Risks: Formal validation failed on the DSR metric — selection bias cannot be ruled out without further independent testing periods. The 20.5% max drawdown is elevated relative to the overall Sharpe on offer. High turnover will compound friction costs meaningfully at live capital scale. Fold 2's underperformance is a reminder that momentum strategies are not regime-agnostic.