The thesis
Momentum SMA20 Rider is a trend-following strategy with a clean, testable idea: names trading furthest above their SMA50 — while price holds above the SMA20 — are in confirmed uptrends worth riding. It ranks a 24-name large-cap universe (AAPL, MSFT, NVDA, JPM, XOM and peers) by distance above SMA50, buys the leaders, and cuts positions when RSI14 pushes past 75 (overbought) or price closes below the SMA20 (structure broken). When the book is full, capital rotates into higher-ranked names. It is a disciplined expression of "cut losers on the trend break, let the ranking do the selection."
Backtest and validation
The headline numbers are attractive but demand context. Over 1,233 trading days the strategy returned 81% (final equity $18,100 on a $10k base), a 12.89% CAGR, with a Sharpe of 0.98 and a max drawdown of 20.91%. Note the 37.13% win rate across 1,427 trades: this is a system that loses more often than it wins and relies on winners running further than losers — textbook momentum, and psychologically demanding to hold.
Validation adds credibility without erasing doubt. Walk-forward testing passed with 3 of 4 folds positive, an out-of-sample return of 43.48% and an out-of-sample Sharpe of 2.18. The Probabilistic Sharpe Ratio is a robust 0.986. But the Deflated Sharpe Ratio — which penalises the 24 configurations trialled — falls to 0.583, a far more sober read on how much edge survives multiple-testing scrutiny.
The fold detail is the most honest part of the record:
| Fold | Window | Return | Sharpe | Max DD |
|---|---|---|---|---|
| 1 | 2021–22 | 4.77% | 0.32 | 20.93% |
| 2 | 2022–24 | 31.84% | 1.59 | 12.09% |
| 3 | 2024–25 | −0.28% | 0.06 | 23.02% |
| 4 | 2025–26 | 43.48% | 2.18 | 5.38% |
Fold 3 is the warning: a full year of dead-flat performance paired with the deepest drawdown. Momentum pays handsomely in trending regimes (folds 2 and 4) and stalls in choppy ones.
Recent live activity
Running live at roughly $10,150 total equity, the strategy has been quiet. Its August rotation included buying JNJ (7 shares at $271.67) and MSFT (4 at $483.90) while selling JPM and BAC — sensible trims and additions. But the last three scheduled runs (24–26 Aug) executed zero trades, holding cash at $464.28. That inactivity is consistent with a full, satisfied book rather than a signal drought.
Verdict
The edge looks real but conditional. Strengths: a coherent thesis, robust PSR, and a genuinely strong recent fold. Risks: heavy turnover (~26,972%), a sub-40% win rate that tests conviction, and clear regime dependence — the strategy earns its keep only when trends persist. Watch fold-3-style chop as the true stress test.