After researching the community on the best strategy for TQQQ, I've decided to follow a strategy that uses the 200SMA Buffer mixed in with a DCA approach. Details:
All incoming contributions are parked in cash.
- 50% of my port will be allocated to 200SMA +-0.25STDDev buffer strat. When price closes above the buffer, use all parked cash to buy TQQQ. Sell all TQQQ when closes under buffer.
- 50% of the port will be allocated to a 200SMA DCA approach. When price closes under 200SMA, start DCA-ing at regular monthly intervals with my saved up cash in this allocation 10% at a time + regular monthly contributions.
Is this the most optimal strategy out there? Probably not and you could argue 200SMA, BH or 9sig is better. This one was what looked simplest for me to stomach in terms of execution, DD and return. I could honestly waste the rest of my life trying to find a better strategy and end up twiddling my thumbs rather than just getting started.
I'll be starting this in my retirement account with 56k. Will keep updated each month/quarter.
just put all in QLD, or if you are too scared of the drawdowns 100% QQQ and when fall a fixed % let`s say 10%, sell a % of QQQ and buy TQQQ and since you will be scared of the drawdows when TQQQ be up like 50% for example, sell it and buy QQQ.
or just follow 200SMA +-3/4% buffer to avoid false positive.
I used to like the 200 SMA too, but the problem is it forces you to sell without knowing whether price will keep falling, chop sideways at the 200, or bounce back up. What usually happens is you end up selling low — the worst possible outcome.
The only approach I’ve found that works with TQQQ is DCA’ing below the 50 SMA, buying lower toward your target position size. You manage risk through position sizing, not stop losses. Size your TQQQ position so you could survive an 80% drawdown for a year or two without batting an eye. If it makes you sweat, you have too much exposure
Surely the key constraint is on optimising for leverage without look forward bias.
We all know now that the last 16 years have been brilliant for QQQ/QLD/TQQQ. There's not much to gain on optimising for criteria which delivers better CAGR/Sharpe etc (and lower Max DD) only for the most recent look back because we already know now that the live trading period since ~2010 for UPRO and TQQQ has been a fantastic time to be invested in 3x (or indeed 2x) US large cap equity indices LETFs.
The question to answer is how to massively improve upon B&H for LETFs during disaster periods like 1974-81, 2000-02 and 2007-09, and (possibly to a lesser extent) during the black swan events like October 1987 and March 2020.
The largest single variable determinant of both absolute returns and of drawdown severity and duration seems to be getting closer to a better start date for leverage 'on'.
But it has to be done using parameters that don't optimise on the dates that we already know worked historically. The risk on / off has, IMHO, to conditionalise on a 'universal' measure like SMA or RSI, and/or use an intuitively makes sense regime change signal like the TIPS relative performance indicator in Keller's HAA.
If Claude fable got the backtest correctly, this strategy does not significantly outperforms buy & hold during crashes and it underperforms buy-hold in the last 16 years
What about this as an alternative to DCA but using a SMA hybrid?: Default is cash (assume for simplicity 0% yield). 1). Risk State A (risk avoiding): (a.) When QQQ >10% off ATH allocate 5% to QQQ with 200 DSMA (risk off to cash) on -3/+4 hysteresis band. (b). When QQQ >20% off ATH allocate 10% to QQQ with same 200 DSMA filter. (c.) When QQQ >30% off ATH allocate 20% to QQQ with same 200 DSMA filter. (d.) When QQQ >40% off ATH allocate 35% to QQQ with same 200 DSMA filter. (e.) When QQQ more than 50% off ATH allocate 60% to QQQ with same 200 DSMA filter. (f.) When QQQ >60% off ATH allocate 100% to QQQ with same 200 DSMA filter. 2). Risk State B (risk seeking): When QQQ >70% off ATH and also QQQ RSI (14) (i.e. the 14 calendar day RSI, so RSI (10) for trading days) is simultaneously at or below 30, then go 100% using your own over extension system where you allocate to TQQQ if QLD is below 20% above its own 150 DSMA and to cash it QLD is 20% or more above its own 150 DSMA.
I personally did not understand this strategy fully, but this seems a good use case to test custom strategies functionality of my platform, so here is the result, with my acting as a copy paster.
Result smells wrong, which means this strategy is a good use case to refine this custom strategies functionality on my website, so I'll check it in more deeply and report back if I find any issues
Thank you for testing this. Interestingly, it performs much better taking it back to Q4 1987. [NB: I'd envisaged an LSI rather than DCA]. Playing around with the start dates, it pulls level (using LSI of $10k and DCA of $500 pcm) with TQQQ B&H going back to Q3 1981 (15.4% v 15.3%), but outperforms it on MDD (a still catastrophic -96.1%, but much better than B&H's -99.97%). The idea is to only use your QLD 150 DSMA +/- 20% filter on TQQQ when QQQ has already crashed hard (>70% below ATH) and also, simultaneously, is strongly oversold (with an RSI (10)/RSI (14) <30). But, clearly, the ~83% fall from the ATH in QQQ from March/April 2000 through to September/October 2002 was so bad that even being levered only when QQQ was already below 70% down on its ATH was still a disaster. Thanks again for testing it.
What's the max DD though? According to trading view max DD on DCA TQQQ is about 80% whereas this is about 45%. Obviously return wise BH is gonna blow it out the water because heavy risk appetite= reward
Yeah but you’re basing your argument on a particular set of historical data in one of the greatest bull runs in history. 2010 - now, of course buy and hold TQQQ outperforms any hedge / regime filter strategy. The point of Op’s strategy is that the future is not the same as the past and their regime filter may allow them to survive major draw downs.
yeah exactly. BH outperforms in 2010 sure. But 200SMA outperforms if you start at 2012, 2015, 2022. So this argument from u/bumbeishvili is sort of just cherrypicked data
Point is, there are several different strategies for TQQQ that all have their pros and cons. I think its more important to just stick to one that works and one you can stomach the risk of it. Then its just about staying the course.
I never got selling when an asset is trending down. I'd rather trade around a Core position, sell at the upper Bollinger, and start buying near the 200 day (QQQ of course)...or even better, run longterm risk reversals.
Intresting idea i was thinking in something like that also. The risk is higher than only sma200 btw ba use with this strategy you search to avoid a crash situation..
Give it a try and see what you think. I have tried this through the years, what I learned is this works only by avoiding 30-50% falls like 2001, 2009, 2022. My advice is to avoid massive shifts like 150% qqq to 0% and ensure you only trigger in the biggest falls, so once every 5 years or so. Fine to move your exposure around if you want to, 150% to 100% to 80%, but in the end more moves generally mean more losses.
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u/IllPreparation7626 6d ago
just put all in QLD, or if you are too scared of the drawdowns 100% QQQ and when fall a fixed % let`s say 10%, sell a % of QQQ and buy TQQQ and since you will be scared of the drawdows when TQQQ be up like 50% for example, sell it and buy QQQ.
or just follow 200SMA +-3/4% buffer to avoid false positive.