Triad 135 Strategy Overview
| CAGR | 16.0% |
|---|---|
| Maximum drawdown | -13.8% |
| MAR ratio | 1.16 |
| History | 46 years (560 months) |
Triad 135 is Triad with one change: during the recovery phase of a U.S. equity drawdown, and only then, the U.S. large-cap sleeve is held through a 2x S&P 500 ETF (SSO) instead of an unleveraged one (IWB). Everything else is identical to the base version. Same three sleeves, same momentum signals, same defensive exits, same drift bands.
That single substitution is what this page is about. The sleeve rules, candidate sets and rebalancing logic live on the Triad page and are not repeated here.
What the 135 means
The name is the maximum total notional exposure when leverage is fully deployed. It is not a target and not a constant. Triad's nominal weights are 30% real assets, 35% U.S. large cap, 35% secondary growth. Substituting a 2x fund for the middle sleeve doubles that sleeve's notional exposure and leaves the other two alone:
30 + (35 x 2) + 35 = 135%
Notional exposure sits at 100% whenever leverage is dormant, which is most of the time, and reaches 135% only in months when Smart Leverage is deployed and the large-cap sleeve is near its nominal weight. Across the 1980 to 2026 backtest, leverage was deployed in 143 months out of 560, roughly a quarter of them.
How Smart Leverage decides
Smart Leverage is a state machine with three states, and it spends most of its life in the first.
Dormant. Nothing happens. The intended allocation passes through untouched and Triad 135 holds exactly what Triad holds.
Armed. IWB has closed a month 10% or more below its highest prior month-end close. That is the trigger, and it is the only thing that can arm the module. A drawdown alone does not deploy leverage. It only makes deployment possible.
Deployed. From armed, leverage deploys in the first month where two conditions hold together: U.S. large cap has better weighted-average momentum than T-bills, and Triad's sleeve 2 wants to be in equities that month. The momentum measure blends three lookbacks, weighted 25% on trailing one-month return, 25% on three-month and 50% on six-month, so recent strength counts without a single hot month being enough on its own.
The second condition matters more than it looks. Sleeve 2 has its own eight-month trend test, and if that test fails the sleeve goes to Treasuries. Smart Leverage cannot override it. Leverage is only ever applied on top of a position the base strategy already wanted to hold.
The three exits
A deployment ends when any one of these fires:
- Momentum turns. T-bills catch up to or pass U.S. large cap on the same weighted-average measure.
- Sleeve 2 goes defensive. If the large-cap sleeve fails its trend test, the leveraged position is sold with the sleeve and sleeve 2 holds Treasuries as it would in the base strategy.
- The 13-month cap. No deployment runs longer than 13 consecutive months, however well it is going.
That cap does two jobs. It limits how long a leveraged fund is held through compounding volatility, and it is set at 13 rather than 12 so a deployment running its full length clears the one-year holding period for long-term capital gains treatment.
One trigger, one deployment
When a deployment ends, for any of the three reasons, the module resets fully and the drawdown that started it is spent. If momentum flips back to favorable the very next month, leverage does not redeploy. Only a fresh 10% drawdown from a new peak can arm it again.
This is the rule that separates Smart Leverage from a naive "leverage whenever momentum is positive" overlay, and it is why the strategy has produced 19 deployment episodes in 46 years rather than a constant flicker in and out of leverage. Episodes have averaged about eight months.
Why only the large-cap sleeve
Sleeves 1 and 3 are never leveraged, and that is deliberate.
The real-assets sleeve holds gold or broad commodities. The secondary sleeve may hold international equities, mid-cap value, managed futures or long/short equity. Those are the positions that carry Triad through periods when U.S. equities are not working, which is precisely when you least want borrowed exposure attached to them. Leveraging a diversifier defeats the reason it is in the portfolio.
U.S. large cap has the deepest liquidity, the most heavily traded leveraged products and the best-documented recovery behavior after a drawdown. It is also the sleeve with the simplest rules, so the overlay has the fewest interactions to reason about. If leverage belongs anywhere in this portfolio, it belongs there.
What leverage does and does not do to drawdown
January 1980 through September 2026, net of trading friction:
| CAGR | Max Drawdown | MAR | |
|---|---|---|---|
| Triad | +14.9% | -13.8% | 1.08 |
| Triad 135 | +16.0% | -13.8% | 1.16 |
| S&P 500 | +12.0% | -51.0% | 0.24 |
The identical maximum drawdown deserves care. It is not evidence that leverage is free. Triad's worst drawdown happened in March 1980, when Smart Leverage was dormant and nothing was deployed, so the leveraged variant simply took the same loss as the base strategy. Read it as a fact about when the worst drawdown occurred, not as a claim about what leverage costs.
The honest measure of that cost is the MAR column, which is return per unit of maximum drawdown. Triad 135 delivers about a percentage point more per year than base Triad and gives up a little risk-adjusted efficiency to get it. That is the trade, stated plainly.
The S&P 500 row is there for scale. Both versions of Triad took a fraction of the index's drawdown while earning more than it.
A leveraged sleeve also drifts faster, so the five-point drift band is breached more often: 32 band resets over the backtest against 30 for base Triad.
Who it is for
Triad 135 suits an investor who already wants Triad, understands why, and will accept modestly worse risk-adjusted returns in exchange for higher absolute returns. The leverage is opportunistic and time-limited rather than structural, so the portfolio is unleveraged in roughly three months out of four.
It is a poor fit if you would not hold base Triad in the first place. Leverage does not fix a strategy you are unsure about, it amplifies it. It is also a poor fit in a taxable account sensitive to short-term gains, for the same reasons base Triad is, and additionally because a deployment ending early on a momentum reversal is a short-term trade by construction.
If 2x feels conservative, Triad 170 applies the same module with a 3x fund. The mechanics are identical and the trade-off is steeper.
The base strategy in brief
Triad divides capital across three independently-signalled sleeves rather than splitting it between stocks and bonds. Each sleeve combines relative momentum, which candidate is strongest, with absolute momentum, whether that candidate is trending up at all, and each exits to intermediate-duration Treasuries on its own signal without consulting the others. Weights are nominal rather than fixed, so sleeves are left to compound and the portfolio resets only when one drifts more than five percentage points from target. Roughly half of all months require no trading at all.
The full rules, candidate sets and portfolio characteristics are on the Triad strategy page.
Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical, does not reflect actual trading, and benefits from hindsight in the selection of strategy rules. Portions of the long-term history rely on reconstructed proxy data for funds that did not exist for the full period. Leveraged ETFs carry risks beyond those of their unleveraged counterparts, including the effect of daily rebalancing on returns over holding periods longer than one day. Investors should carefully consider their risk tolerance and consult with a financial advisor.
For the latest details, visit www.DualMomentumSystems.com