That was the first tough TQQQ Trading Strategy in a while. A losing stock trade is going to happen, and the strategy experienced that this week with a loss of $10.69 per share.
The last two TQQQ Trading Strategy trades saw a $4.80 and a $10.42 per share gain. However, the short trade that occurred this week saw the strategy give up $10.69 per share. As someone who actively trades this strategy, that obviously is not fun.
However, I also know that going back to 2012, only 18% of the trades resulted in a loss. Overall that is a very strong performance, so a losing trades now and then is to be expected.
Another data point for you: the largest consecutive losing streak (i.e. number of losing stock trade in a row) was only two (2).
This was a tough week to initiate a position. The system bought when it was supposed to – on a dip in the TQQQ that signaled an oversold market. However, with the China Evergrande real estate default worries AND the fed meeting today it was a tough environment to trade in.
Even with that news and activity, the TQQQ Trading Strategy is meant to be traded in an unemotional manner, taking the signals as they come no matter what is happening in the market. Over the long-term, the backtested data shows that the system comes out ahead.
Losing Stock Trade Analysis
Let’s take a look at the chart for the most recent trade. As you can see, a Green Bar Signal was generated on September 15th. Based on the strategy rules, 25% of the capital allocated to the strategy was to be invested in TQQQ at the open on the 16th. The purchase price based on the opening price was $145.55.
Unfortunately the TQQQ gapped down shortly after the trade was entered. That does happen from time to time, and can make things emotionally difficult. Sometimes that means the strategy makes more buys (up to three more purchases) which lowers the cost basis. However this time it did not so the trade got stuck with that gap down.
Four trading days after the Green Bar Signal, a Red Bar Signal was generated. Based on the rules, the system sold the entire TQQQ position today on September 22nd at a price of $134.86. That was a loss of $10.69 per share or -7.34%.
TQQQ TRADING STRATEGY PERFORMANCE SINCE FEB 3, 2020
The tracking portfolio for the site started trading on February 3, 2020. Even with this losing trade, the system has turned a $25,000 allocation into $51,127. That is an annual return of 54.87% or a net profit of 104.51%.
Comparing an equal investment into the S&P500 (SPY), that portfolio would have turned $25,000 into only $34,737. That is an annual return of 22.28%.
The most important results from the backtest, is the TQQQ Trading Strategy generated those returns with only a -8.72% maximum system drawdown. Much better than the -33.72% drawdown over the same period for the SPY.
Here is the equity chart so you can compare the two:
These losing trade do happen, but with the system in place all I need to do is wait for the next Green Bar Signal to try again.
