The TQQQ Trading Strategy identifies key oversold and overbought levels of the one of the best leveraged ETFs available to traders. Using a proprietary mean-reversion trading process, the strategy has generated an annual return of 25.99% from May 2010 to November 2020. Read more to learn how to get access to this strategy.
The TQQQ Trading Strategy Overview
The TQQQ Trading Strategy is a mean-reversion trading strategy that:
- Uses a leveraged trading instrument to capture the shorter-term mean-reversion swings of the Nasdaq 100 index.
- Takes a higher-risk/high reward approach to trading the 3x leveraged ticker TQQQ
- Identifies key oversold and overbought levels to determine when to enter and when to exit.
- Is not day trading; uses a swing trading style to capture profit.
- Is systematic – requires very little judgement and decision making. The signals when to buy and sell.
- Buys and sells at the open. Signals are given after the market closes, and trades are entered at the open of the next day.
- Can easily be traded while working a full-time job; signals are generated after market close and trades can be entered prior to the market open using specific order types (more on that in the eBook).
- Is super easy to trade and has had solid backtested performance.
- Is a system I personally trade in my own accounts.
What Does the TQQQ Trading Strategy Trade?
Obviously the TQQQ Trading Strategy trades the TQQQ.
The TQQQ is a 3x ETF that tracks the Nasdaq 100 index. If the Nasdaq 100 goes up 1% in a day, TQQQ should go up approximately 3%. It never works out exactly like that due to fees and slippage, but it gets close.
The risk is when the same index goes down 1% – the 3x ETF will then drop approximately 3%! That can be hard to stomach. TQQQ is not something to place your whole portfolio into, but when used strategically can an excellent portfolio growth tool.
The TQQQ is also not an asset that is recommended to be used in a buy and hold portfolio. Its optimal use is in shorter duration trades. The TQQQ Trading Strategy is a short term system that looks for the best time to buy and sell the TQQQ.
TQQQ Trading Strategy Performance
The TQQQ started trading in 2010. I have been able to go back until its inception and test how the strategy would have performed since then.
Granted, in backtesting terms that is not a long time. Dual Momentum by Gary Antonacci has results going back to 1950 posted on his website. Given the shorter history of TQQQ, that is what we have got to work with.
Strategy Equity Charts
2020 has been a spectacular year for the strategy. In fact, despite the COVID-19 pandemic and the drop in the market in March, the strategy has had its best year ever in 2020.
That is why I want to show you three equity charts.
- The first chart is the strategy growth from May 10, 2010 until December 31, 2019.
- The second chart is the growth from January 1, 2020 until November 22, 2020.
- The third chart is the growth from May 10, 2020 until November 22, 2020.
By displaying all three equity equity charts, you can get a good picture of how the strategy has performed, even without 2020’s spectacular performance.
Equity Chart #1: May 10, 2010 until December 31, 2019
From May 10, 2010 to December 31, 2019 (9 years), the TQQQ Trading Strategy turned $100,000 into $627,464. That is a compounded annual return of 20.96%.
A buy and hold investment in the S&P500, turned $100,000 into $279.530. That is a compounded annual return of 11.20%.
Winner: TQQQ Trading Strategy
Equity Chart #2: Jan 1, 2020 until November 20, 2020
From January 1, 2020 to November 20, 2020 (11 months), the TQQQ Trading Strategy turned $100,000 into $181,913. That is a compounded annual return of 96.63%. Now you can see why I wanted to separate this year’s performance out. Although this is what the strategy would have produced for this period, it is not something I would necessarily expect to happen again (although it very well could!)
A buy and hold investment in the S&P500, turned $100,000 into $109,975. That is a compounded annual return of 10.45%.
Winner: TQQQ Trading Strategy
Equity Chart #3: May 10, 2010 until November 20, 2020
From May 10, 2010 to November 20, 2020 (~10 years), the TQQQ Trading Strategy turned $100,000 into $1,141,580. That is a compounded annual return of 25.99%.
A buy and hold investment in the S&P500, turned $100,000 into $307,751. That is a compounded annual return of 11.22%.
Winner: TQQQ Trading Strategy
As you can see, the TQQQ Trading Strategy has had pretty amazing performance in the simulated backtests. I can never guarantee that the future performance will be the same (please read the disclaimer). However, I personally have decided to invest some of my money into the strategy.
As a final comment about the strategy’s performance, I want to show you the performance tables for the strategy from May 10, 2010 to November 20, 2020. This will show you what the monthly returns of the strategy have been. Some months are better than others, but overall they have been strong.
The Trading Drawdowns
All trading is volatile. Buying and holding the SPY is volatile and the TQQQ Trading Strategy is volatile.
The best representation of volatility is a drawdown chart that compares the drawdowns of the TQQQ Trading strategy compared to the SPY buy and hold.
A drawdown chart simply shows the peak-to-trough decline during the life of the portfolio. It represents the the measurement of decline from an assets peak value to its lowest point over a period of time. It is not what a trader lost, only the biggest unrealized loss the portfolio experienced while invested in the asset.
Make sure you look at the scale on the right of each chart. As you can see, the SPY had an even higher drawdown (especially last March 2020) over the backtest period.
The TQQQ Trading Strategy is volatile, but compared to SPY it is not drastically different.
And when you compare it to a buy and hold of the TQQQ, that is downright scary. Buying and holding the TQQQ has had amazing drawdowns the an investor would have to be able to handle. Could you handle over a 65% drawdown? I don’t think anyone could!
Don’t buy and hold the TQQQ unless you can live with massive drawdowns.
Risk management for the TQQQ Trading Strategy is handled by only buying the TQQQ when statistically it has a higher probability to move higher.
When it looks like the market might turn negative again, then the system sells the TQQQ and goes to cash. This allows the system to sit safely in cash while the market is not performing well.
This strategy also manages risk through position sizing.
When the TQQQ is looking oversold and ready to mean-revert TQQQ is bought in 25% chunks. This slow accumulation of shares helps by giving us an opportunity to buy more if/when TQQQ continues to drop after the first purchase. Statistically the TQQQ has shown to mean revert higher but not always after the first signal.
By buying in 25% chunks, the strategy is able to take advantage of the multiple entry signals that can occur. The strategy allows for four opportunities to add to the position. Sometimes the system will only have a 25% exposure. Other times, it will be 100% invested.
My research shows that TQQQ tends to mean revert when oversold and overbought, and this strategy attempts to take advantage of that by using a systematic process.
The Trading Process
The trading process for the TQQQ Trading Strategy is very simple. It uses rules and a systematic methods to buy and sell shares of the TQQQ.
The flowchart below explains how the system works and what decisions need to be made each day. Click the image for a larger view.
The research shows that TQQQ tends to mean revert, and this strategy attempts to take advantage of that with a very systematic and robotic process.
What Tools Are Needed to Trade the TQQQ Trading Strategy
Before I get into the performance of the system, I want to dive a bit deeper into what you need to successfully trade the TQQQ Trading Strategy.
First, you need a good charting platform. Ideally one where you can code indicators that will show you when the buy and sell signals happen.
Amibroker is used to backtest the system, but on a day-to-day basis I use TradingView to watch the market and generate the trading signals. My recommendation is to use TradingView, unless you want to get into more depth on the backtesting.
The next tool you need is the indicators that the system is based on. These indicators include:
- Green and Red Bar Signals: The system uses visual cues to signal when to buy and when to sell. When a Green Bar is generated, that is a signal to buy TQQQ at the open the next day. When a Red Bar is generated, then all shares of TQQQ are sold. In the eBook, I give you the TradingView code to set this up on your charts.
- Stochastics: The basis for the Green and Red Bars are stochastics, and the specific settings for the stochastics. These stochastics drive the mean-reversion signals. Again, in the TQQQ Trading Strategy eBook I give you the Stochastic settings to trade the system yourself.
On a daily basis, after the close of the market, I review my TradingView charts which tells me when to buy and when to sell. Here is what the TQQQ ETF chart looks like with the indicators on the bottom of the screen (included with the eBook):
The TQQQ Trading Strategy eBook
Going forward, I am going to write about the performance of this strategy on this blog. I will explain trades made using the fully systematic and robotic process.
I have learned after many year of investing and trading that I trade the best and make the most amount of money when I trade robotically. In other words, I like to have a system that tells me when to buy and sell.
The TQQQ Trading Strategy does that.
If you are interested in trading the strategy yourself, or just want to learn more about the system, please click the link below to purchase the TQQQ Trading Strategy eBook.
Here is what the eBook covers:
- Step-by-step instructions on how to generate signals for buying and selling TQQQ.
- Instructions on how to set up TradingView, including the Pine Script required to generate the signals.
- All the required setup parameters for the Green & Red Bar signals.
- How to enter the orders into your broker before the market opens. This works well if you have a full-time job.
- Complete instructions on how to trade the fully systematic system. This includes when to enter the trades, order types, allocation amounts, when to start, and an overview of the mechanics of the system.
- Answers to the most frequently asked questions about the system.
This is a systems I personally trade and I am confident in its ability to grow my wealth. If you want to learn how to use the system, then please get a copy of the eBook.
The TQQQ Trading Strategy eBook is only $29.95.
Get complete instructions for this easy-to-trade strategy and take advantage of the TQQQ’s mean reversion tendency. Click on the eBook image to the right or below to buy and trade this system yourself.