HFEA stands for HEDGEFUNDIE's Excellent Adventure.
Read from the start: chapter 1 The RuleLeveraged ETFs can lose a large part of their value in a short time.
The rule is told in a few sentences. What is hard is keeping it for years, and the two places where staying with it is hardest are well known.
The date that feels wrong. Rebalancing means selling what is doing well and buying more of what is falling. After a strong equity year that feels like punishing the winner; in the middle of a decline, like throwing good money after bad.
That is exactly the rule. Rebalancing only in calm years means following a different rule.
The year in which both sides fall. 2022 is the case this strategy has no answer for, and history has seen such phases more than once. Carrying the rule only through the years in which it is comfortable is not carrying it.
Two things are in your hands here, and both sit in your version: a band, if you set one, which decides how far the portfolio may run before anything happens, and the inflow rule, with which fresh money replaces part of the sales. Both make staying with it cheaper, not more comfortable.
The streak. In the tracker, LETF.io counts how long you have answered the due notifications in time. Answering means confirming or declining; both keep the streak, as long as it happens inside the deadline.
If your answer comes late, that is a missed window. Twice a year a rescue catches you, so that a holiday or an illness does not cost the whole streak; after that it starts again.
So the streak does not measure whether you made money, but whether you stayed with it. With a strategy that has few dates per year, that is a manageable task.
Frozen trackers. When we can no longer evaluate a version reliably, for instance because data is missing, we freeze it instead of guessing. A frozen tracker stays readable but produces no more notifications, and you get a message with the reason.
Two questions about this are in the chapter FAQ: what happens if you miss a date, and how long a period has to be before it says anything about the rule.
Typical Mistakes
Most problems arise not from the rule but from how it is carried out.
The most common mistake is skipping the rebalancing when it feels wrong. Rebalancing only in calm markets means following a different strategy from the one that was tested.
The second is treating the bond block as the safe part. It is built on long maturities, leveraged on top of that in the original and in some of the European blocks, and it fluctuates accordingly.
The third is the size of the position. The original thread describes a ring-fenced portion of a portfolio, and that share grows on its own with success. The mistake is not the first decision but never revisiting it.
Synthetic series. Analyses reaching far back need constructed series for the leveraged products, because those products did not exist at the time. The series are built from index data plus assumptions about financing costs and fees. Where those assumptions leave out the financing cost and the product's distance from its index, they tend to flatter. The interim declines they report regularly reach a large part of the amount committed.