Rules-Based Strategy Update: TQQQ Trend Following December 2018
***Note: I have been testing a new TQQQ strategy and will be posting it when I am comfortable with the results – stay tuned for more information on that strategy***
The TQQQ Trend Following system is a modified buy and hold system that uses a 3x leveraged ETF that tracks the Nasdaq 100 (QQQ). The Trend Following component means that the system will buy and sell TQQQ based on where QQQ trades in comparison to its moving averages.
Since this uses a leveraged ETF, the system has a higher degree of risk. However, by using trend following principles the risk is managed to a more appropriate level. That said, there may be times when the system goes into a big drawdown before the end of the month, which means that having some intestinal fortitude to hold through those periods is important.
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TQQQ Trend Following Rules-Based Investing
This portfolio trades based on specific rules that tell the investor when to buy and sell TQQQ. Here are the rules of the strategy:
- TQQQ must be in a positive uptrend to trade. It must be trading above its 200 and 50 day simple moving average. If not, then TQQQ is not purchased.
- TQQQ is purchased at the Open following two consecutive days trading above the 200 day simple moving average.
- Set a trailing stop at the 50 day simple moving average.
- If TQQQ closes below the 50 day simple moving average, then sell next day at the Open.
- As long as TQQQ continues to trade above the 200 day simple moving average, then repurchase TQQQ at the open on the third day after the two previous closes were above the 50 day simple moving average.
Again, this is a riskier strategy but has provided solid returns in the past. Using the market filter lowers drawdowns (see more in this post: TQQQ Trend Following).
Signals: TQQQ Trend Following
Each month I generate the signals for the portfolio using TC2000. If you want to give TC2000 a try in order to generate the signals for the strategies on Robotic Investing, then use this link for $25 off.
There is a change for December 2018 – the system is in cash.
Here was the QQQ at the beginning of December 2018:
Strategy Tracking & Performance: TQQQ Trend Following
Here is the portfolio tracker and performance chart for TQQQ Trend Following. The Morningstar Portfolio Tracker is used to track all the systems at Robotic Investing. As you can see the strategy performed better than the S&P500 over the month.
This portfolio was started on July 2nd, 2018.
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