The Thesis
Momentum SMA20 Rider is a textbook trend-follower with a clean rule set. It ranks the 24-name universe — mega-cap tech, financials, staples, and energy — by how far each trades above its SMA50, buys the strongest names that also hold above their SMA20, and rotates capital into higher-ranked candidates when the book is full. Exits are mechanical: cut on RSI14 above 75 (overbought) or a close below the SMA20 (trend structure broken). The design accepts that most trades will be small losers and leans on a handful of sustained winners to carry the ledger.
Recent Activity
The strategy is trading a roughly $10,000 paper book and staying near flat in aggregate — daily totals over the past week sat between $9,999 and $10,149. Runs are lean: most sessions fire one order, occasionally with one rejection, and several days execute nothing at all. Recent tape shows a CVX buy (9 @ $212.13), a KO round-trip (bought 22 @ $89.75 on Aug 28, sold @ $88.045 on Sep 1 — a small loss consistent with an SMA20 break), and earlier rotations through V, JPM, MSFT, and BAC. This is the strategy working as designed: incremental, rule-driven, unglamorous.
Backtest and Validation
On paper the numbers are respectable. The full backtest returns 81% over 1,233 days (12.89% CAGR), finishing at $18,100 with a Sharpe of 0.98 and a 20.9% max drawdown. Crucially, it passed walk-forward validation: 3 of 4 folds were positive, out-of-sample return was 43.48% at a 2.18 Sharpe, and the probabilistic Sharpe ratio (PSR 0.986) is high even after adjusting for 24 trials. The deflated Sharpe of 0.583 is more sober but still supportive.
The fold breakdown is where the real story lives. Fold 4 (mid-2025 into 2026) is the standout — 43.48% at a 2.18 Sharpe with only a 5.4% drawdown. But fold 1 barely returned 4.77%, and fold 3 was essentially flat (−0.28%) while enduring a 23% drawdown. That dispersion is honest: momentum thrives in trending regimes and grinds sideways — or bleeds — when leadership churns.
Strengths and Risks
Strengths: disciplined, transparent exits; genuine out-of-sample validation rather than a single fitted curve; and drawdowns that have stayed contained relative to the returns.
Risks worth naming: the win rate is only 37%, so profitability depends entirely on winner size — a fat-tail bet that punishes choppy markets. Turnover is enormous at ~26,972%, meaning fees (1,427 of them here) and slippage will bite harder in live conditions than in a frictionless backtest. And fold 3 is a fair warning that a full year can pass with all risk and no reward.
Verdict
Momentum SMA20 Rider is a well-behaved trend-rider that has earned its live slot on the merits. Watch the win-rate/turnover trade-off closely — it is the strategy's edge and its Achilles' heel in the same breath.