Article 2 · The 200-day average rule

Leverage with rules: what the LRS earns, why, and how much is luck

Getting out of the 3x below the 200-day average has returned more than the index since 1938, with drawdowns of up to −80%.

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An educational tool, not investment advice. Historical figures, computed with the Modeler's engine; past performance does not guarantee future results.

How much has the 200-day average rule returned with the 3x since 1938?

17.3%a year with the rule and the 3x

−80.0%its worst drawdown from a peak

11.4%a year for the index (1x)

11.9%50

13.9%100

18.1%150

17.3%200

16.8%250

15.5%300

Sessions in the average → a year with the rule and the 3x

Wealth of $1 invested (log scale)

The rule holds the 3x when the S&P 500 with dividends is above its average and switches to T-bills when it falls below it.

How it's computed

Real history from February 1938 to July 2026, in whole months. Data through Jul 31, 2026.

Main figure: differs from the article From the article: Since 1938, the 3x LRS has returned 17.4% a year versus 11.5% for the index, with a maximum drawdown of −80%. The Modeler gives 17.3% with data through Jul 31, 2026 and whole months.

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If I follow the rule for a few years, how often do I end up ahead of the index?

76%of windows, ahead of the index

16.1%median annual return of the rule

12.4%the index's (1x)

60%1 year

68%3 years

71%5 years

76%10 years

79%20 years

Years following the rule → of windows, ahead of the index

Annual return per window (p5, p25, p50, p75, p95)

Every day since 1938 is a starting point; over long horizons there are few independent windows.

How it's computed

19,746 windows since Feb 1, 1938, only 8 independent. Data through Aug 31, 2026.

Main figure: matches the article From the article: The LRS was ahead of the index in 60% of one-year windows, 76% of ten-year ones and 79% of twenty-year ones. The Modeler gives the same figure (76%).

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