Frequently Asked Questions

The 200-day Simple Moving Average (SMA) is a technical analysis tool that smooths out price action over 200 trading days. Our strategy is simple: when an index is trading ABOVE its 200-day SMA, we hold leveraged ETFs (3x). When it's BELOW, we stay in cash. This helps you capture major trends while avoiding large drawdowns.

The 200-day SMA is recalculated at every moment, so it's always current. On average, the signal changes 5 times per year for the S&P 500, using the default parameters (newsletter and thus SMA calculation after market close, no upper or lower thresholds to buy/sell). You'll receive email notifications whenever a signal changes, so you're always informed of the latest status.

Academic research shows that moving average strategies have outperformed buy-and-hold over long periods, particularly during major market downturns. Using a 200-day SMA strategy especially reduces the maximum drawdown, while offering high returns. Check out our 200-day SMA strategy page.

Leveraged ETFs use derivatives and borrowing to amplify daily returns. A 3x leveraged ETF aims to deliver 3 times the daily return of its underlying index. For example, if the S&P 500 rises 1%, SPXL (3x S&P 500) should rise about 3%. This amplifies gains but also losses.

Leveraged ETFs can lose value over time due to volatility decay when markets are choppy. This happens because the leverage resets daily, and in volatile sideways markets, the losses compound. This is why our strategy keeps you OUT of leveraged ETFs during downtrends—when markets are uncertain and volatile. We only use leverage during clear uptrends.

Leveraged ETFs are complex instruments with significant risk. They're best used with a clear trading strategy and risk management. The 200-day SMA approach reduces risk by keeping you in cash during downtrends. However, even with this strategy, there's always market risk. Never invest more than you can afford to lose, and consider consulting a financial advisor.

Simply subscribe to our free newsletter to receive daily signals. We'll send you updates on whether to hold or sell your leveraged ETFs for each index. You'll need a brokerage account to actually trade (we recommend low-cost brokers since frequent trading can incur high costs). Start small if you're new to leveraged ETFs.

We recommend brokers with low commissions, fast execution, and good customer support. Compare fees, then open an account that fits your needs. We don't receive commissions from any broker.

There's no minimum, but most brokers require at least $100-500 to get started. Leveraged ETFs can be expensive (usually $100-500+ per share), but some brokers offer fractional shares. Start with whatever you can comfortably invest without affecting your emergency fund or debt repayment. Consider position sizing carefully.

The main risks are: (1) Sudden market gaps where the 200-day SMA is broken overnight, (2) Whipsaw signals during choppy markets, (3) Leverage amplifying losses if you hold through a downturn, and (4) Individual position concentration. Manage risk by: position sizing carefully, using stop losses, diversifying across indices, and keeping emergency reserves in cash.

Detailed Risk Explanations:

1. Sudden Market Gaps: Markets can open significantly higher or lower than the previous close due to overnight news, earnings reports, or global events. If a market gaps down and breaks below the 200-day SMA at the open, you could wake up to substantial losses in your leveraged position. This is especially dangerous with leveraged ETFs that amplify these moves.

2. Whipsaw Signals: During choppy, sideways markets, the price can oscillate above and below the 200-day SMA frequently, generating multiple buy and sell signals in a short period. This "whipsaw" effect can lead to excessive trading costs, emotional fatigue, and potentially buying at relative highs and selling at relative lows within a trading range.

3. Leverage Amplifying Losses: Leveraged ETFs are designed to deliver multiples of daily returns, which means they also amplify losses. A 3x ETF that loses 10% in a day actually loses 30% of its value. If you hold through a market downturn (either by ignoring signals or during a gap), these losses can compound rapidly and become very difficult to recover from.

4. Position Concentration: Focusing heavily on one or two indices means your portfolio is vulnerable to sector-specific or regional risks. For example, if you only follow S&P 500 signals and the stock market in the US crashes while other stock markets perform well, your concentrated position could suffer disproportionately.

Risk Management Strategies:

Position Sizing: If a substantial portion of your portfolio is allocated to leveraged ETFs, its ups and downs can significantly impact your overall portfolio. It's important to size positions according to your risk tolerance and investment goals.

Stop Losses: Consider using trailing stop losses (10-20% below your entry price) to automatically exit positions if they move against you. This provides a safety net while allowing profits to run during strong trends.

Diversification: Spread your risk across multiple indices (S&P 500, NASDAQ, Russell 2000, etc.) rather than concentrating in one. This reduces the impact of any single market event and smooths out your overall returns.

Emergency Cash Reserves: Keep a small portiion of your portfolio in cash or cash equivalents at all times if your risk tolerance requires it. This provides a buffer for unexpected expenses, allows you to buy during market dips, and gives you time to think rather than being forced to sell at inopportune moments.

You can use stop losses when using leveraged ETFs. Traders can use a 10-20% stop loss to limit maximum damage. You could also use trailing stops that follow the price up but protect gains if price reverses. Some set stops at their personal risk tolerance (e.g., "I won't lose more than 5% of my account"). However, the original 200-day SMA strategy doesn't use stops—it's based purely on the moving average signals.