Guide · Trend following
Does 200-Day Rule work?
Across 375 stocks, 200-Day Rule cut the worst fall on 83%, beat buying and holding on risk-adjusted return on 27% and on raw return on 21%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
Stay in while the price is above its 200-day average; get out when it closes below. Jones has called the 200-day his metric for everything.
- In when a daily close is above the 200-day simple average.
- Out when a daily close is below it.
Trend following plays bet that prices that have been rising tend to keep rising for a while, and falls tend to keep falling. The family guide
How to use it
- Expect to be wrong more often than right: only 14% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Real estate (42% beat holding on risk-adjusted return) and worst on Semiconductors (13%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
200-Day Rule did best against holding in the 2008 crash (+29% median gap) and worst in the 2020–21 rally (−22%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| 200-Day Rule | +29% | −8% | +14% | −22% | +6% | −9% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Real estate | 42% | -0.03 |
| Financials | 38% | -0.05 |
| Energy & power | 34% | -0.09 |
| Sectors | 33% | -0.03 |
| Big tech | 33% | -0.10 |
| Industrials & materials | 31% | -0.09 |
| Media & telecom | 30% | -0.06 |
| Software & devices | 29% | -0.09 |
| Healthcare | 22% | -0.12 |
| Industrials & rentals | 22% | -0.09 |
| Metals & mining | 20% | -0.16 |
| Consumer & retail | 18% | -0.15 |
| Micro caps | 17% | -0.40 |
| Indexes & ETFs | 14% | -0.04 |
| Semiconductors | 13% | -0.14 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
200-Day Rule holds 214 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.