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Fidelity just emailed me another "Fidelity Alerts: 52 wk High/Low Trigger for SPY". That's the 12'th in the last 30 days.

Watching QQQ with bated breath.
For TQQQ. which I have a sell on at 60.01. QQQ just need to go up another 0.6% for my sell to get hit.

Happiness is a 3X leverage on a rising index. Don't get greedy.

I got taken out of UPRO last week, 4% lower than it is today.
Don't look back, never look back. Pick your target and be satisfied when you hit it.


Probably not Mechanical, of course. Always big warnings about holding these 3X daily for longer than a day. Merrill tossed up a big red popup warning when I entered a buy order, had to click a box "Yes, I know I am an idiot for buying this, but I absolve you from allowing me to cut my own throat."

But....I did a backtest using historical QQQ daily data, and it shows that in certain conditions that TQQQ is good. Highly volatile, though. My first buy was at 41.22, last buy was at 30.86.

Good to hear from you Ray - one of the original MI wizards (for those of you relatively new here ;-)

Ray - great post!

Ray wrote: Don't look back, never look back. Pick your target and be satisfied when you hit it.

This is great advice. The greatest danger is anchoring to my perceived price, or regret over lost opportunity!

Ray wrote: Probably not Mechanical, of course.

I don't see why not. If your entry and exit method is mechanical, and you follow both in a disciplined and consistent way, it is certainly mechanical by any definition I follow.

Ray wrote: Merrill tossed up a big red popup warning when I entered a buy order, had to click a box "Yes, I know I am an idiot for buying this, but I absolve you from allowing me to cut my own throat."

Love it! This is exactly the sort of message I have to click through with every trade. I take it as a good warning!

Ray wrote: Always big warnings about holding these 3X daily for longer than a day.

I do like to limit to three weeks at most - then just close out the position and wait for the new opportunity.

Ray wrote: But....I did a backtest using historical QQQ daily data, and it shows that in certain conditions that TQQQ is good.

I've tested this myself quite extensively. What I've discovered is that it is best to filter based on certain parameters - e.g., liquidity, consistency, volatility, etc. For quite a while now SOXL always beats out TQQQ by a consistent margin... about 20% higher most of the time.

For the past year these are the trades using this approach. The 3/22 trade is an example where it hit my 21 day threshold and got sold at the open.

Entry Date  Exit Date   Entry Price  Exit Price  % G/L
9/30/2022   10/4/2022   $8.86        $10.19      15.29%
11/2/2022   11/7/2022   $8.21        $9.44       15.71%
1/18/2023   1/23/2023   $12.82       $14.74      15.30%
2/21/2023   3/6/2023    $14.01       $16.11      15.05%
3/9/2023    3/21/2023   $14.89       $17.12      15.01%
3/22/2023   4/12/2023   $16.24       $16.66      2.59%
4/25/2023   5/16/2023   $13.20       $15.18      15.00%
5/16/2023   5/18/2023   $15.02       $17.28      16.04%
8/17/2023   8/24/2023   $19.88       $22.86      15.32%
9/21/2023   10/10/2023  $17.42       $20.03      15.14%
10/20/2023  11/9/2023   $16.61       $19.10      15.46%
12/20/2023  12/26/2023  $28.04       $32.25      15.08%
1/3/2024    1/18/2024   $26.25       $30.19      15.14%
1/31/2024   2/8/2024    $32.10       $36.92      15.01%

You use your method for entry and always enter at exactly the close price on the day of the signal. After the trade is executed you immediately set your Profit Latch. In this case it is 15% from the entry pice. The reason the returns above are above 15% is because interest is added between the exit price and the entry at the next signal.

Hmmmm, you are more in line with the conventional thinking, to not hold these long term. Volatility decay is the killer.

I've read a number of papers that did a deep(er) delve into the math. Two points come through:
1) Optimal leverage is about 2X.
2) DCA is better than lump-sum.

And, of course, don't use leverage in a bear market. :-) ;-)

I think another point would be the same as what people have said about options investing -- do not compound your returns. Decide your position size and take the profits off the table.

Now I've got to go back and take another close look at my timing signals.

I bought 3 tranches of TQQQ, they are currently up 46%, 73%, and 95%. Leverage is 2.5X, 3.2X and 3.5X.
At the time I bought #2, #1 had a loss of 15%, whereas QQQ was down 3.5%.

The idea of 15% gain or 21 days hold is interesting, I never thought of that.

Ray wrote: Optimal leverage is about 2X.

Interesting you'd mention that. It is my primary strategy using QLD - 2x the Nasdaq 100.

Ray wrote: And, of course, don't use leverage in a bear market. :-) ;-)

Actually, I disagree. The vast majority of gains I've seen over the years came from investing in inverse ETFs during a bear market. They far outstrip the long gains in a bull market, especially gains had during a flat or relatively slow going bull market.

Ray wrote: do not compound your returns

This depends on where you are in the stage of life. For my tax-deferred accounts I have zero need of the funds so I let the magic of compounding have its way.

I'm glad to see someone adopts an approach like this. It is super simple to pull off, and produces remarkable returns.

Although...

PORTFOLIOVISUALIZER says CAGRs since inception (March 2010)
QQQ 18.5%
QLD 31.5% (2X QQQ)
TQQQ 40.7% (3X QQQ)

SPY 13.2%

$10,000 becomes:
$106,038 
$451,514 
$1,161,119 
$56,387 

Much higher volatility and MaxDD.
https://www.portfoliovisualizer.com/backtest-portf...

Nice. Is this using some standard TA method for entry? Most of the entry points seem to be based on a short term drop.
But not consistently and the entry on 5/16/2023 does not fit in.

Entry Date  Exit Date   Entry Price  Exit Price  % G/L
9/30/2022   10/4/2022   $8.86        $10.19      15.29%
11/2/2022   11/7/2022   $8.21        $9.44       15.71%
1/18/2023   1/23/2023   $12.82       $14.74      15.30%
2/21/2023   3/6/2023    $14.01       $16.11      15.05%
3/9/2023    3/21/2023   $14.89       $17.12      15.01%
3/22/2023   4/12/2023   $16.24       $16.66      2.59%
4/25/2023   5/16/2023   $13.20       $15.18      15.00%
5/16/2023   5/18/2023   $15.02       $17.28      16.04%
8/17/2023   8/24/2023   $19.88       $22.86      15.32%
9/21/2023   10/10/2023  $17.42       $20.03      15.14%
10/20/2023  11/9/2023   $16.61       $19.10      15.46%
12/20/2023  12/26/2023  $28.04       $32.25      15.08%
1/3/2024    1/18/2024   $26.25       $30.19      15.14%
1/31/2024   2/8/2024    $32.10       $36.92      15.01%

Mark

Mark asked: Is this using some standard TA method for entry? Most of the entry points seem to be based on a short term drop.

I have quite a few methods I've developed over the years for obtaining entry points like this. You have to come up with a method that works for you. ST drop, alone, however will not work. It's not quite that simple.

I'm just using the 43 week SMA of QQQ. Buy at > SMA, sell at 1% below SMA.

Since 2/2010 inception, B&H of QQQ or QLD or TQQQ had lower CAGR than the timed version, and lower stdev.

However, a rough synthetic backtest of 2000-2010, B&H TQQQ had -43% CAGR (near total loss) and timed had 0.5% CAGR vs timed QQQ of 3.6%

Untimed QQQ had -6.9% CAGR.

--------------------
In good times a longish hold of the leveraged QQQ gives great returns although with gut wrenching volatility and drawdowns. Possibly doing a hold of 3 weeks or 15% gain, and then taking the gains off the table would work out ok. But you still need some method to keep you out in times like 1999-2010. That' a loooong time to stick to a strategy that says to keep out. Most people would abandon this long before the 10 years had passed.
Who knows, it could be that 2010-2024 was just a once in a lifetime occurance.

Ray wrote: Possibly doing a hold of 3 weeks or 15% gain, and then taking the gains off the table would work out ok. But you still need some method to keep you out in times like 1999-2010.

My primary purpose for strategies like these that I've built is to limit exposure to the market. The thought process comes from the whole Black Swan even probability. One way to mitigate risk is to limit time invested. Of course, it is not a complete removal of risk. For the trades I posted above you end up being invested 32% of the time. So your risk is completely eradicated for 68% of the time.... to the degree that holding cash equates to no risk. :)

There are many ways to identify bear markets. Some of them I've shared with the MI board, my best ones I have not, but it is certainly possible to identify periods of high risk with a pretty high degree of accuracy. Once you have done this identification, you actually do not sit completely out for the whole period. Rather, you employ inverse funds in the same way you employ long funds. In fact, if your indicators are accurate for doing that, the success rate of inverse fund trades in a bear market are way better than long funds in a bull or flat market. And the returns far exceed... the reason is simple. The market tends to take the stairs on the way up, but the elevator on the way down.

For those interested in a simple indicator for trading leveraged ETFs like I've shared in this thread you are welcome to visit my blog. It provides you with a simple tool for identifying oversold-overbought periods that provide signal dates like illustrated above.

Possibly doing a hold of 3 weeks or 15% gain...

FWIW, the 21-day hold is in market days -- one month.

DB2

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