Guide · Trend following
Does Trend Template work?
Across 374 stocks, Trend Template cut the worst fall on 93%, beat buying and holding on risk-adjusted return on 16% and on raw return on 14%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
A seven-point checklist of moving-average and 52-week-range conditions that marks a stock in a confirmed uptrend.
- In when all seven conditions pass: price above the 50, 150 and 200-day averages; 150-day above 200-day; 200-day higher than a month ago; 50-day above the 150 and 200-day; price at least 30% above its 52-week low and within 25% of its 52-week high.
- Out on a daily close below the 50-day average.
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 18% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It sits in cash much of the time (holding on about 27% of days), so judge it on risk-adjusted return rather than on matching a rising market.
- It worked best on Financials (27% beat holding on risk-adjusted return) and worst on Big tech (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
Trend Template did best against holding in the 2008 crash (+42% median gap) and worst in the 2020–21 rally (−36%). 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 | |
|---|---|---|---|---|---|---|
| Trend Template | +42% | −14% | +23% | −36% | +16% | −13% |
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 |
|---|---|---|
| Financials | 27% | -0.11 |
| Sectors | 25% | -0.43 |
| Energy & power | 19% | -0.19 |
| Semiconductors | 17% | -0.36 |
| Healthcare | 17% | -0.37 |
| Real estate | 16% | -0.18 |
| Software & devices | 15% | -0.32 |
| Consumer & retail | 15% | -0.33 |
| Industrials & materials | 14% | -0.28 |
| Industrials & rentals | 11% | -0.32 |
| Media & telecom | 10% | -0.17 |
| Metals & mining | 8% | -0.30 |
| Indexes & ETFs | 0% | -0.32 |
| Big tech | 0% | -0.37 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Trend Template holds 78 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.