The Thesis
Momentum SMA20 Rider is a pure trend-following play. It ranks a 24-name large-cap universe — the usual megacap suspects plus staples and industrials like AAPL, MSFT, NVDA, JPM, KO, XOM and CAT — by distance above the SMA50, then buys the leaders whose price is also holding above the SMA20. Confirmation matters: two moving averages must agree before capital commits. Exits are mechanical and unsentimental — cut when RSI14 pushes past 75 (overbought) or when price closes below the SMA20 (trend structure broken). When the book fills, weaker holdings are rotated out for stronger ranks. It is a textbook "buy strength, sell breakdowns" system.
Backtest and Validation
Over 1,233 trading days the strategy returned 81% (final equity $18,100 from a $10k base), a 12.89% CAGR, with a Sharpe of 0.98 and a max drawdown of 20.91%. The win rate is a low 37.13% across 1,427 trades — but that is by design for momentum: many small stops, a few large runners. The bigger caution flag is turnover of ~26,972%, meaning the book churns aggressively and pays a fee on nearly every leg.
Validation is the more reassuring story. Across four walk-forward folds the strategy passed, with 3 of 4 folds positive. Out-of-sample it returned 43.48% at a Sharpe of 2.18, and the deflated statistics hold up: PSR 0.986 and DSR 0.583 against 24 trials suggests the edge is not merely the product of overfitting. Notably, the strongest fold (May 2025–Aug 2026, +43.48%, Sharpe 2.18, drawdown just 5.38%) is also the most recent — a good sign for live deployment.
The Regime Risk
Fold 3 (Feb 2024–May 2025) is the cautionary tale: −0.28% at a Sharpe of 0.06 with a 23% drawdown. Momentum systems bleed in choppy, trendless tape, and this fold shows exactly that. The strategy is a bet on trends existing; when markets range, the whipsaw of buying above SMA20 and selling below it grinds down capital and fees.
Recent Activity
The live paper book is currently quiet and, candidly, uninspiring. Total account value sits around $9,691 as of the 29 Sep run — slightly below the $10k base — with most capital deployed and only $563.68 in cash. Recent runs have been thin: several days executed zero trades, while the active week rotated into MSFT, PFE, AAPL and NVDA and trimmed MSFT, JNJ, KO, CVX and MA. The one uncomfortable data point is a same-week MSFT round trip — buying at $498.87 and $516.46 while also selling at $497.53 — the kind of churn the high-turnover profile predicts.
Verdict
The validation math is genuinely strong and the recent fold is encouraging. But the low win rate, heavy turnover, and demonstrated flatness in trendless regimes mean this strategy earns its keep only when markets cooperate. Right now, live results are flat — a reminder that a good backtest is a hypothesis, not a guarantee.