200-Day Moving Average strategy
The 200-day moving average is the single most-watched long-term trend line in markets: the simple average of the last 200 daily closing prices, re-figured every day, which smooths roughly ten months of price into one slow line. It has no single inventor — its fame comes from being the line the financial press and long-term trend-followers treat as the rough dividing line between a rising and a falling market. It is almost always a plain, equally-weighted average; an EMA version leans on recent prices and turns a little sooner. On its own the line only describes the trend — it becomes a strategy when it is used as a regime switch: in the asset while price is above the line, in cash while it is below, which is how it runs here. That is a different rule from the golden cross and death cross, which compare two lines — the 50-day crossing the 200-day — and are covered separately. A line this famous is worth testing honestly rather than trusting on reputation.
An illustration of where the rule triggers — not real prices, and not a signal to act. The dashed forks mean the outcome is undetermined; whether the rule made money is what a backtest measures.
How it works
- • How it's calculated — a simple moving average — the last 200 daily closing prices added up and divided by 200, rolled forward each day, the oldest close dropping off as each new one is added. It is the slowest of the common averages; an EMA weights recent prices more and turns sooner, but the classic 200-day line is the plain, equally-weighted SMA this rule uses.
- • Why 200 days — roughly ten months of trading — long enough that short swings wash out and only the primary trend is left, which is why it is the reference line the market treats as “the long-term trend.”
- • A regime, not a cross — on this site it runs as a single-line regime rule: it holds the asset while price is above the 200-day line and steps to cash while price is below it — one line, in or out. That is not the golden cross, which watches the 50-day line crossing the 200-day; same number, a different mechanic.
- • The catch — because the line is an average of the last 200 closes, it lags every turn by design — in only after price has already reclaimed the line, out only after it has already lost it, so it confirms a move rather than catching the low. It can sidestep part of a deep fall but gives back part of the rebound, and when price hugs the line it flips in and out for a run of small losses.
On this site, 200-Day Moving Average is run as the 200-Day MA Regime. See honestly how that approach performed across every famous stock and coin — costs on, no look-ahead, measured against simply buying and holding, with the losses shown.
The honest caveat
A 200-day moving average can do one thing well: by sitting in cash through deep downtrends it tends to blunt the worst falls. Across our frozen census the mechanical rules as a class fell less than simply holding at every reported level on these same US stocks (see the drawdown study) — but that is a finding about the whole set of strategies, not a measurement of this one rule, and a shallower fall is a trade, not a free lunch and not an edge. On our survivorship-biased set of 36 famous US stocks and ETFs, this same 200-day regime rule still lagged simply buying and holding on 25 of them and beat it on only 11 — a median excess return of −21.9% versus buy & hold over the roughly five-year window, a median across those names and not a forecast for any one of them. Whatever fall the line sidesteps it pays for by sitting out part of the recovery, which is why most of these famous names did better simply held. The honest value is finding the specific assets where that trade paid — and never reading the most-watched line on the chart as an edge. Test it before you trust it.
Past performance is not a reliable indicator of future results. This is an educational, analytical tool — not investment advice, and not a recommendation to buy or sell anything. You make all decisions and execute on your own broker. This is an educational, analytical tool, not investment advice and not a recommendation to buy, sell or use any strategy. You make all decisions and execute on your own broker.