Donchian channel breakout on IWM — Published Backtest & Verdict

We tested it in public: Donchian channel breakout on IWM (2019-01-31 to 2026-10-23) returned +5.4% vs +103.6% buy-and-hold across 53 trades. Exact rules, full stats, and our honest verdict.

• Total return: +5.4% (trailed buy-and-hold at +103.6%)
• CAGR: +0.7% vs +9.7% buy-and-hold
• Max drawdown: -30.7% vs -41.1% buy-and-hold
• Win rate: 43.4% over 53 trades
• Period: 2019-01-31 to 2026-10-23 (IWM), published 2026-10-24

The claim on trial

Buy the break to a new 20-day high and exit on a 10-day low — the classic Donchian channel breakout beats buy-and-hold.

The exact rules

• Entry channel: highest adjusted close of the prior 20 bars. Exit channel: lowest adjusted close of the prior 10 bars. Warmup 20 bars; strategy window starts 2019-01-31.
• Signal observed at bar i close; trade prints at bar i close.
• Entry on bar i starts earning on bar i+1 (NO look-ahead).
• Exit on bar i retains bar i's return.
• Close > prior-20-day high → buy at close. Close < prior-10-day low → sell at close. Long only, cash 0%. No transaction costs, no taxes modeled.

Our honest verdict

A classic breakout rule on IWM barely beat cash (+5.4% in 7.7 years) and lost badly to holding (+103.6%): whipsaws dominated (30 of 53 trades lost, 43.2% time in market), the exit rule cut max drawdown ~10 points (-30.7% vs -41.1%), and its best trade (+17.7%, Nov 2020-Jan 2021) accounts for more than the system's entire net profit.

Original X thread · StratIQ track record · All published backtests

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Not financial advice — research and education only; do your own due diligence.