PythagorasGoal/docs/diary/2026-06-19-trackD-trendport.md

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).