The Thesis
Momentum SMA20 Rider is a straightforward trend-follower. It ranks a 24-name large-cap universe — the usual megacap tech, financials, staples and energy leaders — by how far each trades above its SMA50, then buys the strongest names that are also holding above their SMA20. Exits are rules-based and unsentimental: cut a position when RSI14 pushes past 75 (overbought) or when price closes back below the SMA20 (trend structure broken). When the book is full, capital rotates out of laggards and into higher-ranked uptrends. It is a clean expression of "ride confirmed strength, sell into froth or breakdown."
Backtest and Validation
On paper the numbers are attractive. The backtest returns 81% total (12.89% CAGR) over 1,233 days, ending at $18,100 equity with a Sharpe of 0.98 and a max drawdown of 20.91%. The win rate is only 37.13%, which is characteristic rather than alarming for trend-following: most trades are small losers, and a minority of big winners carry the curve.
Encouragingly, the validation holds up better than a single backtest would suggest. Across four walk-forward folds, three were positive, the out-of-sample return was 43.48% at a Sharpe of 2.18, and the probabilistic Sharpe ratio (PSR) of 0.986 is strong even after accounting for 24 trials — the deflated Sharpe of 0.583 still clears zero. Fold 4 (May 2025–Aug 2026) was the standout at +43.48% with just a 5.38% drawdown.
The Risks
Two things temper the enthusiasm. First, regime sensitivity is real: fold 3 (Feb 2024–May 2025) returned essentially nothing (-0.28%) while enduring the deepest drawdown of the set at 23.02%. Choppy, trendless markets are this strategy's kryptonite, and it can bleed fees while going nowhere. Second, turnover is enormous — 26,971% across 1,427 trades — and fees totalled $1,427 in the backtest. That churn is a structural drag that only pays off when trends are clean.
Live Activity
The live paper account tells a more sober story. Total equity sits at $9,908.92 with just $337.64 in cash, meaning the book is essentially fully invested — which is why the last four scheduled runs (Sept 10–15) executed nothing. Recent executed trades include buys in KO, CVX and JNJ and sells in MSFT, V, JPM and BAC, a mix that leans more toward staples and energy than momentum leadership. Notably, live equity is marginally below its starting mark, a stark contrast to the 81% backtest and a fair illustration of the gap between historical simulation and a live regime.
Verdict
The validation is genuinely reassuring — this is not an obviously overfit curve. But the live start is flat-to-down, the drawdown profile is regime-dependent, and the strategy needs sustained, orderly trends to overcome its heavy turnover. Worth watching, not yet worth celebrating.