Guide · Trend following
Does 10-Month SMA work?
Across 375 stocks, 10-Month SMA cut the worst fall on 84%, beat buying and holding on risk-adjusted return on 33% and on raw return on 25%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
Check once a month. Hold the asset while its month-end price is above its 10-month average; otherwise sit in Treasury bills.
- In when the month-end close is above the 10-month average.
- Out, in T-bills, when it closes below.
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
- It trades rarely (about 1.8 switches a year), so it suits someone who checks in occasionally, and a single bad call can last months.
- Expect to be wrong more often than right: only 30% 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 (58% beat holding on risk-adjusted return) and worst on Industrials & rentals (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
10-Month SMA did best against holding in the 2008 crash (+30% median gap) and worst in the 2020–21 rally (−20%). 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 | |
|---|---|---|---|---|---|---|
| 10-Month SMA | +30% | −7% | +5% | −20% | +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 | 58% | +0.02 |
| Media & telecom | 50% | +0.02 |
| Indexes & ETFs | 43% | -0.06 |
| Sectors | 42% | -0.05 |
| Energy & power | 41% | -0.03 |
| Industrials & materials | 35% | -0.08 |
| Financials | 35% | -0.04 |
| Software & devices | 32% | -0.06 |
| Consumer & retail | 32% | -0.10 |
| Healthcare | 22% | -0.14 |
| Metals & mining | 22% | -0.10 |
| Semiconductors | 17% | -0.11 |
| Big tech | 17% | -0.06 |
| Micro caps | 17% | -0.18 |
| Industrials & rentals | 0% | -0.09 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
10-Month SMA holds 195 of 377 names as of the Oct 13, 2026 close.
No changes of 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.