The thesis
Momentum SMA20 Rider is a trend-following strategy with a deliberately simple premise: names trading furthest above their SMA50, with price still holding above the SMA20, are in confirmed uptrends worth riding. It ranks a 24-name universe of US large caps — the usual megacap tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), healthcare (JNJ, UNH), and staples (KO, PG, WMT) — by distance above SMA50 and buys the strongest. Exits are mechanical: cut when RSI14 pushes above 75 (overbought) or price closes below the SMA20 (trend structure broken), and rotate capital into higher-ranked names when the book is full.
Recent activity
The strategy is live and trading a ~$10k paper book. Over the past week it stayed close to flat, with total equity hovering between roughly $10,014 and $10,184. Scheduled runs have been quiet — most days executed zero or one order. Recent fills tell the rotation story: it added KO (22 shares @ $89.75) and JNJ (7 @ $271.67) on the staples/healthcare side while trimming V and JPM. Earlier in August it opened positions in MSFT, BAC, ABBV, and V. The cadence is measured, not frenetic, on any given day.
Backtest and validation
Over 1,233 trading days the backtest returned 81% (final equity $18,100), a 12.89% CAGR, with a Sharpe of 0.98 and a max drawdown of 20.91%. Crucially, the validation pass held up: across four walk-forward folds, three were positive, the out-of-sample return was 43.48% at an OOS Sharpe of 2.18, and the Probabilistic Sharpe Ratio came in at a very high 0.986. The most recent fold (May 2025–Aug 2026) was the standout — 43.48% return, 2.18 Sharpe, and just a 5.38% drawdown.
Strengths
The headline is that out-of-sample behaviour did not collapse — a common failure mode for momentum systems that curve-fit the backtest. Fold 2 (31.84%) and fold 4 (43.48%) show the strategy captures sustained trends well, and the tight fold-4 drawdown suggests the SMA20 exit is doing real risk-management work.
Risks and caveats
Balance is warranted. The win rate is only 37.13% — this is a strategy that loses on most trades and relies entirely on winners running far enough to pay for the losers. Turnover is enormous at 26,971%, spread across 1,427 trades, so execution costs and slippage matter more here than the fee-free backtest implies. Fold 3 (Feb 2024–May 2025) was essentially dead money at -0.28% with a 23% drawdown, a reminder that choppy, trendless regimes hurt. And with a Deflated Sharpe Ratio of 0.583 across 24 trials, the multiple-testing-adjusted confidence is only moderate. The edge looks real, but it is regime-dependent and cost-sensitive.