Simple breakout strategy thread posts 18% annual
A public thread detailed a breakout strategy with trailing stops and volatility sizing applied to industry portfolios that reportedly returned 18% annualised since 1926, and included a 37‑page PDF guide for implementation. The post is circulating as a ready‑made quant project for students to code and backtest. (x.com)
The research behind the thread is authored by Carlo Zarattini and Gary Antonacci and was posted to SSRN as "A Century of Profitable Industry Trends" with a 34‑page PDF available on SSRN (posted June 7, 2024). (papers.ssrn.com) The authors report an industry‑timing model that produced a long‑sample annualised return of 18.5% with 12.1% annual volatility and a Sharpe ratio of 1.46 over the 1926–2024 sample in their paper. (papers.ssrn.com) The study applies the model to 48 industry portfolios covering July 1926 onward, using long historical industry series comparable to the industry datasets maintained by Kenneth R. French for academic backtests. (papers.ssrn.com) Methodologically the paper uses a channel‑based trend signal, trailing stops on long positions, and volatility‑based position sizing (equalised volatility contributions) with cash allocations to short‑term T‑bills when not invested. (papers.ssrn.com) The authors also present a 20‑year replication using 31 State Street sector ETFs and report the strategy survives reasonable levels of commissions and slippage in that ETF window. (papers.ssrn.com) Independent robustness checks published on arXiv in December 2024 flagged sensitivity to parameter choices, potential overfitting risks, and the need for conservative trading‑cost assumptions when translating the historical industry test to live ETF trading. (arxiv.org) The work received formal recognition when it was named the winner of the CMT Association’s Charles H. Dow Award in 2025 for its contribution to trend‑following research. (optimalmomentum.com)
