The thesis
Momentum SMA20 Rider is a trend-rider, plain and simple. It ranks a 24-name large-cap universe by distance above the SMA50, buys the names whose price is holding above the SMA20, and exits on one of two triggers: RSI14 above 75 (overbought) or a close back below the SMA20 (trend structure broken). When the book is full, capital rotates out of weaker ranks into stronger ones. The design philosophy is the oldest one in momentum: cut the loser fast, ride the winner.
Recent activity
The strategy is live and runs on a daily schedule, typically executing one trade per run and occasionally logging a rejection. A clean illustration of the logic came mid-month: it bought 18 shares of DIS at $106.82 on 8 Oct and sold the same 18 at $108.23 on 14 Oct — a small gain. The discipline shows on the downside too. A 2-share CAT position bought at $847.03 on 2 Oct was sold at $810.75 on 7 Oct, a loss taken rather than nursed — exactly what the SMA20-break rule is meant to enforce. Other recent moves include trimming NVDA (8 @ $226.47), exiting a large PFE lot (70 @ $27.60), and rotating into XOM and ABBV. The live book's total value sat at $9,753.12 on 14 Oct, roughly flat across the two-week window.
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 20.91% maximum drawdown. The striking number is the win rate: just 37.13% across 1,427 trades. This system does not win often — it makes money by letting its fewer winners dwarf its many small losers, the signature profile of trend-following.
Validation is the more reassuring half of the story. The walk-forward passed with 3 of 4 folds positive, a Probabilistic Sharpe Ratio of 0.986, and a Deflated Sharpe of 0.583 after accounting for 24 trials. The most recent fold (May 2025–Aug 2026) is the standout: +43.48% at a 2.18 Sharpe with only a 5.38% drawdown.
Strengths and risks
The edge looks structural rather than data-mined: a high PSR and three positive folds spanning different regimes are hard to fabricate. But the risks are equally visible. Fold 3 (Feb 2024–May 2025) returned −0.28% at a 0.06 Sharpe with a 23% drawdown — momentum stalls in choppy, trendless markets, and this strategy will stall too. Turnover is enormous at roughly 26,972%, which generated $1,427 in fees; in a higher-cost live environment, that drag compounds. And the deflated Sharpe of 0.583, while positive, is a standing reminder that selecting across 24 trials takes real shine off the 0.98 headline. The verdict: a sound, honestly validated momentum system — just don't expect it to earn its keep in a sideways year.