Claim check: The trend is your friend
“The trend is your friend: buy what is going up, sell what is going down.”
What the data says
Partly Partly: the rule gave a higher Sharpe ratio than buy-and-hold in 6 of 10 markets over 2010-12-21 to 2026-11-10 and in both halves of the history in 3; the median CAGR was +3.9% against +2.3% for buy-and-hold and the median maximum drawdown -46.1% against -71.2% (before costs). It holds in some markets, not across the board.
It holds in some markets or periods, leans the right way without proof, or helps on risk but not on return.
Who says it
Wall Street proverb popularised by Ed Seykota and Jesse Livermore lore; the core pitch of trend-following CTAs.
Origins are as commonly cited and were not independently verified.
How we tested it
Time-series momentum: long from the day after the 252-day return is positive, cash otherwise. The claim counts as true if the Sharpe ratio beats buy-and-hold in the full history and in both halves. Shorter lookbacks are shown as a robustness check.
Results
| Market | Period | CAGR | Buy and hold | Sharpe | Buy and hold | Max drawdown | Buy and hold | In market | Trades | Reading |
|---|---|---|---|---|---|---|---|---|---|---|
| S&P 500 | 2011-01-03 → 2026-11-10 | +8.8% | +13.8% | 0.66 | 0.85 | -31% | -34% | 90% | 34 | No effect |
| Gold | 2011-01-03 → 2026-11-10 | +4.1% | +6.4% | 0.36 | 0.45 | -36% | -46% | 63% | 49 | No effect |
| Silver | 2011-01-03 → 2026-11-10 | +5.3% | +2.8% | 0.33 | 0.25 | -58% | -76% | 52% | 41 | Full history only |
| Oil | 2011-01-03 → 2026-11-10 | -0.9% | -4.9% | 0.07 | 0.05 | -56% | -95% | 50% | 89 | Full history only |
| Natural gas | 2011-01-03 → 2026-11-10 | -8.4% | -24.0% | -0.14 | -0.31 | -84% | -99% | 27% | 36 | Clear and stable |
| Commodities | 2011-01-03 → 2026-11-10 | +3.7% | +1.7% | 0.35 | 0.19 | -34% | -66% | 50% | 54 | Clear and stable |
| Agriculture | 2011-01-03 → 2026-11-10 | +1.0% | -0.4% | 0.15 | 0.04 | -33% | -62% | 46% | 30 | Full history only |
| EUR/USD | 2010-12-21 → 2026-11-10 | -0.6% | -1.0% | -0.08 | -0.08 | -24% | -35% | 48% | 61 | No effect |
| Bitcoin | 2015-05-27 → 2026-11-10 | +70.2% | +65.0% | 1.02 | 0.91 | -71% | -83% | 72% | 22 | Clear and stable |
| Ether | 2018-07-19 → 2026-11-10 | +20.7% | +19.4% | 0.51 | 0.52 | -72% | -82% | 61% | 28 | No effect |
Sharpe ratio minus buy-and-hold
Robustness: other settings
| Setting | Verdict on its own | Markets with a stable win | Markets where it won |
|---|---|---|---|
| Main setting | Partly | 3 / 10 | 6 / 10 |
| 126-day lookback | Partly | 4 / 10 | 9 / 10 |
| 63-day lookback | Partly | 4 / 10 | 8 / 10 |
Stability across the two halves of history
A saying that only works in one half of the history is not much of a rule. Each row shows the effect in the full history, the first half and the second half; green means the claimed effect was present.
| Market | Full history | First half | Second half |
|---|---|---|---|
| S&P 500 | -0.19 2011-01-03 → 2026-11-10 | -0.24 2011-01-03 → 2018-12-04 | -0.16 2018-12-04 → 2026-11-10 |
| Gold | -0.10 2011-01-03 → 2026-11-10 | -0.05 2011-01-03 → 2018-12-04 | -0.23 2018-12-04 → 2026-11-10 |
| Silver | +0.08 2011-01-03 → 2026-11-10 | +0.25 2011-01-03 → 2018-12-04 | -0.09 2018-12-04 → 2026-11-10 |
| Oil | +0.02 2011-01-03 → 2026-11-10 | -0.08 2011-01-03 → 2018-12-04 | +0.02 2018-12-04 → 2026-11-10 |
| Natural gas | +0.17 2011-01-03 → 2026-11-10 | +0.42 2011-01-03 → 2018-12-04 | +0.02 2018-12-04 → 2026-11-10 |
| Commodities | +0.16 2011-01-03 → 2026-11-10 | +0.28 2011-01-03 → 2018-12-04 | +0.01 2018-12-04 → 2026-11-10 |
| Agriculture | +0.11 2011-01-03 → 2026-11-10 | +0.14 2011-01-03 → 2018-12-04 | -0.06 2018-12-04 → 2026-11-10 |
| EUR/USD | -0.01 2010-12-21 → 2026-11-10 | -0.17 2010-12-21 → 2018-11-29 | +0.21 2018-11-29 → 2026-11-10 |
| Bitcoin | +0.11 2015-05-27 → 2026-11-10 | +0.03 2015-05-27 → 2021-02-17 | +0.21 2021-02-17 → 2026-11-10 |
| Ether | -0.01 2018-07-19 → 2026-11-10 | +0.19 2018-07-19 → 2022-09-14 | -0.31 2022-09-14 → 2026-11-10 |
Context and cross-checks
Shown for context; not part of the verdict.
The site's own strategies
| Strategy | Market | Sharpe, 5 years | Benchmark, 5 years | Sharpe, full | Benchmark, full | CAGR, full | Benchmark, full | Max DD, full | Benchmark, full | Reading |
|---|---|---|---|---|---|---|---|---|---|---|
| MOM-01 Time-Series Momentum | EUR/USD | 0.19 | -0.05 | -0.08 | -0.13 | -0.6% | -1.5% | -24% | -35% | Clear and stable |
| MOM-01 Time-Series Momentum | SPY | 0.61 | 0.72 | 0.64 | 0.85 | +8.2% | +13.8% | -31% | -34% | No effect |
| MOM-01 Time-Series Momentum | GLD | 0.67 | 0.89 | 0.35 | 0.51 | +3.9% | +7.5% | -36% | -46% | No effect |
| MOM-01 Time-Series Momentum | USO | 0.35 | 0.68 | 0.07 | 0.05 | -0.8% | -4.8% | -55% | -95% | Full history only |
| MOM-01 Time-Series Momentum | DBC | 0.52 | 0.63 | 0.34 | 0.21 | +3.5% | +2.2% | -33% | -66% | Full history only |
| MOM-01 Time-Series Momentum | SLV | 0.51 | 0.57 | 0.32 | 0.35 | +5.0% | +6.1% | -58% | -76% | No effect |
| MOM-01 Time-Series Momentum | DBA | 0.52 | 0.68 | 0.15 | 0.13 | +0.9% | +0.8% | -33% | -62% | Full history only |
| MOM-01 Time-Series Momentum | UNG | -0.35 | -0.27 | -0.14 | -0.35 | -7.9% | -25.1% | -84% | -99% | Full history only |
| MOM-01 Time-Series Momentum | BTC | 0.51 | 0.25 | 0.99 | 0.80 | +65.2% | +52.0% | -71% | -83% | Clear and stable |
| MOM-01 Time-Series Momentum | ETH | -0.08 | 0.09 | 0.49 | 0.56 | +19.0% | +22.9% | -72% | -94% | No effect |
| TREND-02 Donchian Breakout | GLD | 0.72 | 0.89 | 0.46 | 0.51 | +4.6% | +7.5% | -27% | -46% | No effect |
| TREND-02 Donchian Breakout | SPY | 0.45 | 0.72 | 0.55 | 0.85 | +4.4% | +13.8% | -18% | -34% | No effect |
| TREND-02 Donchian Breakout | USO | 0.66 | 0.68 | 0.32 | 0.05 | +4.3% | -4.8% | -36% | -95% | Full history only |
| TREND-02 Donchian Breakout | EUR/USD | 0.01 | -0.05 | -0.19 | -0.13 | -0.9% | -1.5% | -24% | -35% | No effect |
| TREND-02 Donchian Breakout | DBC | 0.79 | 0.63 | 0.40 | 0.21 | +3.6% | +2.2% | -29% | -66% | Clear and stable |
| TREND-02 Donchian Breakout | SLV | 0.57 | 0.57 | 0.38 | 0.35 | +5.8% | +6.1% | -45% | -76% | Full history only |
| TREND-02 Donchian Breakout | DBA | 0.36 | 0.68 | 0.36 | 0.13 | +2.4% | +0.8% | -18% | -62% | Full history only |
| TREND-02 Donchian Breakout | UNG | -0.16 | -0.27 | -0.19 | -0.35 | -7.9% | -25.1% | -77% | -99% | Clear and stable |
| TREND-02 Donchian Breakout | BTC | 0.37 | 0.25 | 0.98 | 0.80 | +48.3% | +52.0% | -57% | -83% | Clear and stable |
| TREND-02 Donchian Breakout | ETH | 0.30 | 0.09 | 0.70 | 0.56 | +32.8% | +22.9% | -56% | -94% | Clear and stable |
| TURTLE-01 Turtle Trading | SPY | 0.62 | 0.72 | 0.78 | 0.85 | +6.7% | +13.8% | -13% | -34% | No effect |
| TURTLE-01 Turtle Trading | GLD | 0.54 | 0.89 | 0.39 | 0.51 | +3.8% | +7.5% | -23% | -46% | No effect |
| TURTLE-01 Turtle Trading | USO | 0.23 | 0.68 | 0.23 | 0.05 | +2.7% | -4.8% | -52% | -95% | Full history only |
| TURTLE-01 Turtle Trading | EUR/USD | 0.10 | -0.05 | -0.23 | -0.13 | -1.3% | -1.5% | -36% | -35% | No effect |
| TURTLE-01 Turtle Trading | DBC | 0.27 | 0.63 | 0.31 | 0.21 | +2.7% | +2.2% | -32% | -66% | Full history only |
| TURTLE-01 Turtle Trading | SLV | 0.11 | 0.57 | 0.32 | 0.35 | +4.5% | +6.1% | -49% | -76% | No effect |
| TURTLE-01 Turtle Trading | DBA | 0.23 | 0.68 | 0.11 | 0.13 | +0.5% | +0.8% | -25% | -62% | No effect |
| TURTLE-01 Turtle Trading | UNG | -0.42 | -0.27 | -0.34 | -0.35 | -13.6% | -25.1% | -92% | -99% | Full history only |
| TURTLE-01 Turtle Trading | BTC | 0.32 | 0.25 | 1.05 | 0.80 | +54.1% | +52.0% | -63% | -83% | Clear and stable |
| TURTLE-01 Turtle Trading | ETH | 0.06 | 0.09 | 0.79 | 0.56 | +43.9% | +22.9% | -52% | -94% | Full history only |
Sharpe ratio minus benchmark, full history · Benchmark = the buy-and-hold shown on the strategy pages.
The honest caveat
Profitable trend following depends heavily on a few big trends; this sample has only 10 markets.
Descriptive statistics from historical data, before costs. Not a forecast and not investment advice.
Questions
The trend is your friend: buy what is going up, sell what is going down.
Partly: the rule gave a higher Sharpe ratio than buy-and-hold in 6 of 10 markets over 2010-12-21 to 2026-11-10 and in both halves of the history in 3; the median CAGR was +3.9% against +2.3% for buy-and-hold and the median maximum drawdown -46.1% against -71.2% (before costs). It holds in some markets, not across the board.
How was this claim tested?
Time-series momentum: long from the day after the 252-day return is positive, cash otherwise. The claim counts as true if the Sharpe ratio beats buy-and-hold in the full history and in both halves. Shorter lookbacks are shown as a robustness check.
Related strategies on Quant Arena
Markets used
S&P 500 · Gold · Silver · Oil · Natural gas · Commodities · Agriculture · EUR/USD · Bitcoin · Ether