The essentials at a glance
- The rule compares an index with its moving average, the SMA line, every day.
- If the index closes above the line, you are invested.
- If it closes below, you step out and wait.
- The goal: not fully riding out long downturns, where leveraged ETFs fall especially hard.
- The cost: false signals when the index hovers close to the line.
The rule at a glance
- Signal index
- The unleveraged parent index of your version.
- Line
- Moving average over the selected window.
- Buffer
- Optional entry and exit buffer in percent around the line.
- Trading
- At the close of the signal day, with confirmation days per version.
- Costs
- Trading spread and tax on realised gains per switch.
- Data basis
- Index, product from launch, synthetic before that.
The rule in the chart
Past performance is not a reliable indicator of the future.
What you will find on this page
Pick the values, put them into practice and stay the course.
ParametersImplementation and TaxesStaying the CourseLeveraged ETFs can lose a large part of their value in a short time.
SMA stands for simple moving average. The 200-day line is exactly that: the average of the last 200 closing levels, recomputed every day. As long as the S&P 500 closes above it, the leveraged ETF stays in the account. If it closes below, the position is sold and the wait begins until the index is back above the line.
Leveraged ETFs fall especially deep in long declines and take a long time to recover from them. Following the rule means sitting out exactly those phases on the sidelines.
The line is an average: the mean of the closing levels of the last 200 trading days, formed anew every day. 200 trading days are roughly ten months. 200 is the established and most widely used window length, which is why it is the value of the standard version. Other indices can call for other windows; the adjustable windows are described in the chapter Parameters.
The figures next to the chart apply to the period shown and to the index's current distance from the SMA line. How the rule fared over long periods and across many starting dates is not what they show; that is in the chapter Backtest.
From that the rule reads one answer per day. If the index closes above the line, you are invested. If it closes below, you are not.
An example with round numbers: the line stands at 100 points and the index closes at 98.75. It is below the line, you are out. Three weeks later it closes at 101.5 while the line stands at 100.25. It is above again, you are back in.
That has really happened: in autumn 2022 the broad US market stood below the line for months; you would have been out during that time.
Only the closing level counts: a price that touches the line at midday and closes above it again is not a signal.
The calculation runs on the index, not on the price of your leveraged product. The product runs differently because of fees and leverage, and computing on it gives you different signals.
Buffers are a common addition in the German scene: a minimum distance from the line before a signal counts. There are also versions that put both thresholds above the line, entry and exit each above it. The formulas on this page do not model that.
Between signals nothing happens. Most of the time this strategy consists of looking once and doing nothing.
The values of your version, that is window and buffer, are in the chapter Parameters.