# 2026-06-19 — Track D: Robust walk-forward TREND PORTFOLIO (BTC+ETH), vol-targeted + leverage

Follow-up to Track A. Thesis under test: trend-following's real value in crypto is **drawdown
reduction** vs buy & hold (it sidesteps crashes), and that lower DD lets you apply **leverage** and
**diversify** BTC+ETH into a deployable, risk-adjusted *earning* system — even if each single signal
has modest Sharpe. Tool: `scripts/research/trackD_trendport.py` (run
`uv run python scripts/research/trackD_trendport.py`).

## Method (honest, no look-ahead)
Equity built directly from a **target-position series** (the harness's documented "build your own
equity" path), NOT per-trade chaining:
- `target[i]` decided with data **≤ close[i]**; **held during the next bar** (close[i]→close[i+1]).
- `pnl[t] = target[t-1]·r[t]`, `r[t]=close[t]/close[t-1]-1` — positions **shifted +1 bar** ⇒ no leakage.
- Fees on **turnover**: `0.05%/side·|target[t-1]-target[t-2]|` (0.10% RT baseline; swept 0.10–0.40% RT).
- **Vol-targeting** (main lever): `target = direction · (target_vol / realized_vol)`, clipped to the
  leverage cap. `realized_vol` = annualized rolling std of past bar returns (30d window), ≤ close[i].
- **Portfolio** = 50/50 BTC+ETH net-return series, rebalanced each bar on common timestamps.

Leakage sanity check passed: an *oracle* target using next-bar sign explodes (10^119×) — proving the
engine holds `target[i-1]` over bar `i` — while our signals (TSMOM blend, MA-slope, Donchian) only use
`close[i]` and earlier. Zero-position equity = exactly 1.0.

## What was tested
TSMOM multi-horizon blend (1/3/6-month-equiv on 1h bars), MA-slope (EMA200 slope), Donchian breakout
with trailing channel stop — each vol-targeted, long-short **and** long-flat, per-asset and combined.
Grid: target-vol × leverage-cap × horizon-set; explicit EARLY(2018-21)/LATE(2022-26) split;
fee & leverage sweep; full per-year 2018-2026.

## Results — the honest picture

**1) The thesis holds: massive DD reduction, and diversification helps.**
| Strategy (50/50 port, tvol20%, LS) | CAGR | Sharpe | maxDD | volA |
|---|---|---|---|---|
| **B&H 50/50** | +48% | 0.92 | **77.8%** | 70% |
| TSMOM 1-3-6m blend | +14.2% | **1.00** | **18.9%** | 14% |
| MA-slope | +14.1% | 0.79 | 21.9% | 19% |
| Donchian-trailing | +14.7% | 0.89 | 17.7% | 17% |

Trend cuts maxDD from ~78% to ~18% while keeping a Sharpe **above** buy&hold (1.00 vs 0.92). The
portfolio Sharpe (1.00) **beats both sleeves** (BTC 0.95, ETH 0.75) — diversification works as claimed.
The **long-flat** variant is even cleaner: Sharpe **1.32**, maxDD **13.3%** (no short funding/borrow risk).

**2) It is genuinely robust (not a lucky cell).**
- *Per-year (headline LS):* every full year **positive** 2019-2025 (+19/+36/+19/+6/+2/+14/+4%) and 2026 +8%.
- *Grid:* Sharpe ≈1.00 across **all** target-vol (10-40%) × leverage caps — flat plateau (vol-targeting
  just scales). DD scales ~linearly with target-vol (10%→DD10%, 40%→DD35%).
- *Horizon-set:* every subset (1m/3m/6m/1-3m/3-6m/1-2-4m/2-4-8m) is **positive**; Sharpe 0.37→1.39.
  Shorter horizons (1m, 1-2-4m) score best (Sharpe 1.34-1.39) — a real plateau, not one combo.
- *Fee:* survives to 0.40% RT (Sharpe 1.00→0.39, still positive at 4× baseline fee).

**3) The honest caveat — most of the edge is the EARLY regime.**
Walk-forward split, same param set both assets:
- **EARLY 2018-2021:** CAGR +26%, Sharpe **1.63**, DD 18%.
- **LATE 2022-2026:** CAGR +7.3%, Sharpe **0.57**, DD 19%.
The signal is real and still net-positive every late year, but its quality **halved** post-2021
(crypto vol compressed, trends choppier). This is the same warning Track A raised, now quantified: the
edge is strongest 2019-2021 and merely *modest* in the 2022-26 regime.

**4) Leverage is a red herring; target-vol is the real dial — and it costs DD linearly.**
At tvol=20% on 60-80% crypto vol, positions stay **sub-1x** (avg gross 0.23×): the leverage cap
**never binds**. To deploy real leverage you raise target-vol; Sharpe stays ~1.0, DD scales:

| target_vol | avg gross | CAGR | Sharpe | maxDD |
|---|---|---|---|---|
| 20% | 0.23× | +14% | 1.00 | 19% |
| 40% | 0.45× | +28% | 1.00 | 35% |
| 60% | 0.68× | +40% | 1.00 | 48% |
| 80% | 0.90× | +50% | 1.00 | 60% |
| 100% | 1.12× | +58% | 0.99 | 69% |

## Verdict — is this a deployable earning system?

**Yes as a risk-adjusted system; NO as a fast path to €50/day on €2000.**

- This is the **first post-reset config that is genuinely robust**: Sharpe ~1.0 (long-flat 1.3),
  positive every year 2018-2026, robust across grid/horizon/fee, on both assets, on certified data,
  with honest no-look-ahead accounting. It is a real, deployable trend portfolio and a clear
  improvement over Track A's lucky single cells. The thesis (DD reduction → leverageable, diversifiable)
  is **confirmed**.
- **But the earnings are modest.** Headline (tvol20%, 2x cap, LS): CAGR **+14.2%**, DD 19% ⇒ steady-state
  **~€0.73/day on €2000**. To average **€50/day at this CAGR you need ~€137k capital**, not €2000.
- **Leverage can't close the gap cheaply.** Pushing target-vol to 80% gives CAGR ~50% (DD **60%**) — and
  at €2000, 50%/yr is still only ~€2.7/day in steady state. Reaching €50/day in 1-2 years from €2000
  would require both heavy leverage (DD 60-70%, near-ruin) **and** lucky path — not a sane plan.
- **Regime risk:** the edge is much weaker post-2021 (Sharpe 0.57 LATE). Deploy sized for the LATE
  regime, not the EARLY one.

**Recommendation:** treat this as the **core risk engine** (compounding ~14%/yr at DD<20%, or
long-flat ~16%/yr at DD 13%), deployable now at low size to validate live execution. It grows €2000,
but to *€50/day* the lever is **capital + time**, not leverage. Realistic near-term: ~€0.7-1.5/day on
€2000; €50/day needs ~€70-140k or a second uncorrelated edge stacked on top.

## Deliverable
`scripts/research/trackD_trendport.py` — self-contained, prints B&H benchmark, broad scan, grid
robustness, horizon robustness, walk-forward early/late, fee+leverage sweep, headline config per-year,
and the path-to-€50/day table. Reusable building blocks (vol-targeting, target→equity, portfolio).