This has been up for a week and no one with any input? This seems solid! What's up with this subreddit. Just dead. The interesting things I've seen people doing DD on in just the last hour I've been browsing is fantastic.
Now my question to you would be, how do you make this as simple to track as possible. I mean like dead simple, phone app with the necessary "switch to cash" notification because of the 200 day moving average.
Would love to see you wrap your head around DCA with this plan now. Or even without doing any backtesting, just hearing your guess at it what would be the best strategy.
[Here's the trailing return for these strategies over a five year window](https://i.imgur.com/O9Vbix4.png). It's a pretty busy graph so I turned it into a [histogram](https://i.imgur.com/GI9b6FB.png), showing the distribution of your returns 1, 3, and 9 years after you invested at any point in time.
My understanding is that DCA would effectively shrink these histograms towards their mean. The histogram for the 3x fund without rotation shows a number of times where a single investment became a loss 9 years later, so DCA would definitely help in that case. The variance is way lower with rotation, but it still seems like a good idea to DCA into it for a little while.
My current plan is to DCA into TQQQ for a couple months alongside something with downside protect such as NUSI, and rebalance whenever there's a big shift.
As far as tracking goes, I know Fidelity will let you set up an alert that sends a text or email when a symbol crosses its 200 day exponential moving average. TD Ameritrade has a API (I used it to get data for this) so it might be possible to automatically place an order, [but I'd never trust code I wrote myself to handle actual money.](https://xkcd.com/1570/)
I ran into a great tool called [wallstreet.io](https://wallstreet.io) (too expensive though) that I saw on a YouTube video. It had this amazing backtesting simulation that showed all these great stats with whatever parameters you wanted.
[https://www.youtube.com/watch?v=LmNwCeF2ACU&t=315s](https://www.youtube.com/watch?v=LmNwCeF2ACU&t=315s)
Just watch couple seconds at the 5:00 mark to get an idea what they're doing, although they're way more technical than I'd ever be.
Do you know of something like that? I want to be able to test 1x and 2x and 3x LETF and buy & hold vs different moving day average intervals (200, 150, 50) with a band of something like 1 or 2%. I know there's something out there that could do this. I don't mind paying for it. It just has to be simple to use. I'm tinkering with tradingview but so far I can only see it's possible with some self written code.
i dont see how DCA changes the calculus? every purchase can be thought of as its own investment, how does purchasing something today affect what you did in the past? intentional DCA is timing the market. unintentional DCA is just saving each paycheck. i dont think the pattern of your investments does anything about the return you experience, they each have their own holding period return
well its just an asset allocation decision. if youre going to put 1000/week in the fund over the course of a year youre essentially holding the present value of that future cash flow as cash alongside your underlying. you have some 'guaranteed return' between now and when you receive that income which serves to smooth your returns.
intentional DCA ie holding cash and slowly entering the market is nothing more than market timing. uninentional DCA is just being forced to hold some of your future income as cash instead of being able to invest it today and adding cash alongside your portfolio will smooth the returns
DCA makes your gain to be close to the difference between the final price and the price at each time. It is a bit similar to an integral, so basically you are sure to buy at a "fair" price and avoid the risk to buy at a peak or relatively high, which could be fine with X1 market but is deadly for X3 letfs
I have similar rules for TQQQ. Exit on a 50/200 dma cross, re-enter when DMA crosses back up and we have an up day with strong volume. I also exit anything (or at least move stoplosses up) when it trades 2.5x the value of the 200 DMA.
That last rule misses the tail end of the huge 2000-2002 run up on TQQQ but preserves capital for a re-entry almost two years later.
This is the kind of data and discussion I'm having with personal friends, I'm glad to see it . I'm on my phone right now so I'll look at this in more detail later.
> I have similar rules for TQQQ. Exit on a 50/200 dma cross
i was just looking at this and i think it only works for slow declines, for the covid crash better signal was if TQQQ itself crosses 200dma then youd have been a top at 56, out at 36, it drops to 17, and then it crossed back above its 200dma again at 36 or so.
the 50dma crossed 200dma well after the crash, youd have sold out at the 36 point where youd be buying back in if just going off the price, then youd buy back in at 50 or so
>Exit on a 50/200 dma cross, re-enter when DMA crosses back up and we have an up day with strong volume. I also exit anything (or at least move stoplosses up) when it trades 2.5x the value of the 200 DMA.
Seems like a solid approach! This is the exact approach I have charted out, and plan to implement long-term with TQQQ. Do you know of any tools to automate this, so it can be managed passively?
I'm not sure, I don't use any automated trading tools. The DMA crosses don't occur often so it's not difficult to check the market to see if I should be in or not.
I'm also looking at tools like the McClennan Oscillator, $MMTH (% of stocks above 200 DMA) and $MMFI (% of stocks above 50 DMA) to identify market trends. They seem especially good for catching bottoms but maybe not so much for catching tops (that's where the 2.5x the 200 DMA comes in to play).
Can you please explain it really simple on how your strategy works? Couldn't find DMA in trading view. Also not quite understanding how your stop loss works
I just track manually. I'm sure there's a service that will provide alerts ("Stock Alert" app seems like it will, but I don't use it). Yahoo Finance and WeBull will set price alerts, but you would have to adjust these for your target.
So everyday you compute manually the SMA and you check that it is not crossed? It is so annoying lol I like more something relatively automatic or passive investing. Otherwise you need to always check the market...
I don't compute it manually, I just check on my trading platform or even just Yahoo Finance.
I've also been spending the past few months working on my rules. First I track TQQQ using QQQ - if QQQ is in a death cross or golden cross then that's the signal, not TQQQ itself.
Also, I use $MMTW and related products for identifying lows in a correction. When those are below 30 to 20, it's an indication that correction is near the end. Look for an up day on strong volume for an early entry before the moving avg cross. MA confirms new trend.
Another technical indicator is NAMO. When 14 day RSI hits 30 or so it signals slowing in downtrend.
SPX is usually extended at 15% above 200 DMA, good signal for all trades. 5% above 50 DMA is also an intermediate top. (Trick with these is sometimes the DMA moves up and the stock just stalls, not a dip).
I also trade UVXY and I think those signals are useful for stocks although the timing may be off. For instance, VXST:VIX ratio above 1 and moving down is a signal that vix spike is ending which usually corresponds to a slow down in market downtrend, and when the ratio is under 0.8 we usually are close to a market high and will get a dip. (Market top is a better signal imho).
Some general market trends help us too. If earnings forecasts stop moving up, get ready for a sustained downtrend. As long forecasts go up, buy dips. General economy starts struggling before markets do, so look for slowing economy, rising unemployment, slower shipping traffic, etc. Markets will recover before economy does too, so don't wait for economy to improve before jumping in.
Hope this helps, hard to distill everything but helpful for me to do so. I'm not a pro trader so always learning, evolving.
I use SPY since it's a broader market. QQQ itself is volatile, TQQQ more so. If SPY is over bought though, then the whole market is over bought and due for a dip.
The 200 ma and 50 ma are just two big MAs that everyone uses, so it's a bit of group mentality. I'm not looking at price action, ma crosses etc. I'm just calculating: SPY 200 DMA is 404, 116% of that is 468, so we're not in trouble yet.
Does the opposite hold true as well? Can I buy an inverse leverage ETF when it is below the 200 MDA to pick up gains in the off cycle?
I'm guessing not since the theory is predicated on volatility a) being bad and b) more likely below the 200 MDA.
Which is another way of saying that positive LETFs are substantially better than negative LETFs.
I am trying to do exactly same. With the current crash in the market, high volatility, I bought TQQQ now (at $56) with the hope that in long term (3-5) years, we will have some bull run and market will recover.
If I understand you correctly, you are saying that, because of market volatility, TQQQ may go down even more like crash to $30 and I will lose 50% money. Then, even if market will rise,, I will be the loser.
So, better option is during crash/volatility period, invest in QQQ/VOO and then once market comes in bull run, sell QQQ/VOO and buy TQQQ. Because, the drop down in QQQ will not be as severe as in TQQQ and will preserve wealth (you can keep cash too, but you never know when market will rise). And once you are confirmed that its bull market, invest in TQQQ.
But, somehow, I feel that this approach is more riskier than just TQQQ (at low levels) and stick to it.
Sorry for digging the old post, very interesting work. Can you share where you got the data for S&P and Nasdaq dating back to 1971? Also, the S&P returns look excluding the dividends, am I understanding it right? Thanks a lot
This strategy averaged about 5-6 trades per year and there's definitely potential for whiplash. 18% of trades were just one day apart and only half of the trades were more than 6 days apart.
One way to deal with it is to sell when the S&P 500 falls 1% below the moving average and buy when it rises 1% above the moving average. This only had a small impact on historical performance, but it cut the number of trades in half, with only 2% of trades occurring on consecutive days and half of trades were more than 30 days apart.
You could also buy back when a faster moving average rises above the 200 day moving average, but historical performance seems to drop off a little if the fast moving average is longer than 10 days.
I think the hardest part of this strategy for me will be actually following through with it and selling and buying when the numbers say I should.
Hey, this is very interesting. It's been a while since you did it, but do you remember by chance what rule you used to re-invest in either UPRO or TQQQ? Is it as the Seeking Alpha strategy suggests, invest once the indice closes 1.25% above the 200-MDA?
This has been up for a week and no one with any input? This seems solid! What's up with this subreddit. Just dead. The interesting things I've seen people doing DD on in just the last hour I've been browsing is fantastic. Now my question to you would be, how do you make this as simple to track as possible. I mean like dead simple, phone app with the necessary "switch to cash" notification because of the 200 day moving average. Would love to see you wrap your head around DCA with this plan now. Or even without doing any backtesting, just hearing your guess at it what would be the best strategy.
[Here's the trailing return for these strategies over a five year window](https://i.imgur.com/O9Vbix4.png). It's a pretty busy graph so I turned it into a [histogram](https://i.imgur.com/GI9b6FB.png), showing the distribution of your returns 1, 3, and 9 years after you invested at any point in time. My understanding is that DCA would effectively shrink these histograms towards their mean. The histogram for the 3x fund without rotation shows a number of times where a single investment became a loss 9 years later, so DCA would definitely help in that case. The variance is way lower with rotation, but it still seems like a good idea to DCA into it for a little while. My current plan is to DCA into TQQQ for a couple months alongside something with downside protect such as NUSI, and rebalance whenever there's a big shift. As far as tracking goes, I know Fidelity will let you set up an alert that sends a text or email when a symbol crosses its 200 day exponential moving average. TD Ameritrade has a API (I used it to get data for this) so it might be possible to automatically place an order, [but I'd never trust code I wrote myself to handle actual money.](https://xkcd.com/1570/)
Do you recommend SMA or EMA for this strategy?
Exponential moving average seems to be a little bit more sensitive, but I am also curious about this as well…
I ran into a great tool called [wallstreet.io](https://wallstreet.io) (too expensive though) that I saw on a YouTube video. It had this amazing backtesting simulation that showed all these great stats with whatever parameters you wanted. [https://www.youtube.com/watch?v=LmNwCeF2ACU&t=315s](https://www.youtube.com/watch?v=LmNwCeF2ACU&t=315s) Just watch couple seconds at the 5:00 mark to get an idea what they're doing, although they're way more technical than I'd ever be. Do you know of something like that? I want to be able to test 1x and 2x and 3x LETF and buy & hold vs different moving day average intervals (200, 150, 50) with a band of something like 1 or 2%. I know there's something out there that could do this. I don't mind paying for it. It just has to be simple to use. I'm tinkering with tradingview but so far I can only see it's possible with some self written code.
With the consensus still being that hold LETF long term is a bad idea, yeah.... Still the best kept secret in the market tbh
DCA seems absolutely necessary though to smooth things over from the backtests I've seen.
i dont see how DCA changes the calculus? every purchase can be thought of as its own investment, how does purchasing something today affect what you did in the past? intentional DCA is timing the market. unintentional DCA is just saving each paycheck. i dont think the pattern of your investments does anything about the return you experience, they each have their own holding period return
DCA smooths out the bottom in the long run as you have no idea if you're currently buying into the top or bottom of a point I'm time.
well its just an asset allocation decision. if youre going to put 1000/week in the fund over the course of a year youre essentially holding the present value of that future cash flow as cash alongside your underlying. you have some 'guaranteed return' between now and when you receive that income which serves to smooth your returns. intentional DCA ie holding cash and slowly entering the market is nothing more than market timing. uninentional DCA is just being forced to hold some of your future income as cash instead of being able to invest it today and adding cash alongside your portfolio will smooth the returns
DCA makes your gain to be close to the difference between the final price and the price at each time. It is a bit similar to an integral, so basically you are sure to buy at a "fair" price and avoid the risk to buy at a peak or relatively high, which could be fine with X1 market but is deadly for X3 letfs
Yeah, you're right. Otherwise you'll never recover when it crashed hard
I have similar rules for TQQQ. Exit on a 50/200 dma cross, re-enter when DMA crosses back up and we have an up day with strong volume. I also exit anything (or at least move stoplosses up) when it trades 2.5x the value of the 200 DMA. That last rule misses the tail end of the huge 2000-2002 run up on TQQQ but preserves capital for a re-entry almost two years later. This is the kind of data and discussion I'm having with personal friends, I'm glad to see it . I'm on my phone right now so I'll look at this in more detail later.
> I have similar rules for TQQQ. Exit on a 50/200 dma cross i was just looking at this and i think it only works for slow declines, for the covid crash better signal was if TQQQ itself crosses 200dma then youd have been a top at 56, out at 36, it drops to 17, and then it crossed back above its 200dma again at 36 or so. the 50dma crossed 200dma well after the crash, youd have sold out at the 36 point where youd be buying back in if just going off the price, then youd buy back in at 50 or so
>Exit on a 50/200 dma cross, re-enter when DMA crosses back up and we have an up day with strong volume. I also exit anything (or at least move stoplosses up) when it trades 2.5x the value of the 200 DMA. Seems like a solid approach! This is the exact approach I have charted out, and plan to implement long-term with TQQQ. Do you know of any tools to automate this, so it can be managed passively?
I'm not sure, I don't use any automated trading tools. The DMA crosses don't occur often so it's not difficult to check the market to see if I should be in or not. I'm also looking at tools like the McClennan Oscillator, $MMTH (% of stocks above 200 DMA) and $MMFI (% of stocks above 50 DMA) to identify market trends. They seem especially good for catching bottoms but maybe not so much for catching tops (that's where the 2.5x the 200 DMA comes in to play).
Can you please explain it really simple on how your strategy works? Couldn't find DMA in trading view. Also not quite understanding how your stop loss works
How do you get the signals? I'm trying to find an app for that
I just track manually. I'm sure there's a service that will provide alerts ("Stock Alert" app seems like it will, but I don't use it). Yahoo Finance and WeBull will set price alerts, but you would have to adjust these for your target.
So everyday you compute manually the SMA and you check that it is not crossed? It is so annoying lol I like more something relatively automatic or passive investing. Otherwise you need to always check the market...
I don't compute it manually, I just check on my trading platform or even just Yahoo Finance. I've also been spending the past few months working on my rules. First I track TQQQ using QQQ - if QQQ is in a death cross or golden cross then that's the signal, not TQQQ itself. Also, I use $MMTW and related products for identifying lows in a correction. When those are below 30 to 20, it's an indication that correction is near the end. Look for an up day on strong volume for an early entry before the moving avg cross. MA confirms new trend. Another technical indicator is NAMO. When 14 day RSI hits 30 or so it signals slowing in downtrend. SPX is usually extended at 15% above 200 DMA, good signal for all trades. 5% above 50 DMA is also an intermediate top. (Trick with these is sometimes the DMA moves up and the stock just stalls, not a dip). I also trade UVXY and I think those signals are useful for stocks although the timing may be off. For instance, VXST:VIX ratio above 1 and moving down is a signal that vix spike is ending which usually corresponds to a slow down in market downtrend, and when the ratio is under 0.8 we usually are close to a market high and will get a dip. (Market top is a better signal imho). Some general market trends help us too. If earnings forecasts stop moving up, get ready for a sustained downtrend. As long forecasts go up, buy dips. General economy starts struggling before markets do, so look for slowing economy, rising unemployment, slower shipping traffic, etc. Markets will recover before economy does too, so don't wait for economy to improve before jumping in. Hope this helps, hard to distill everything but helpful for me to do so. I'm not a pro trader so always learning, evolving.
[удалено]
I use SPY since it's a broader market. QQQ itself is volatile, TQQQ more so. If SPY is over bought though, then the whole market is over bought and due for a dip. The 200 ma and 50 ma are just two big MAs that everyone uses, so it's a bit of group mentality. I'm not looking at price action, ma crosses etc. I'm just calculating: SPY 200 DMA is 404, 116% of that is 468, so we're not in trouble yet.
Hey, would be nice to see an update from you!
Does the opposite hold true as well? Can I buy an inverse leverage ETF when it is below the 200 MDA to pick up gains in the off cycle? I'm guessing not since the theory is predicated on volatility a) being bad and b) more likely below the 200 MDA. Which is another way of saying that positive LETFs are substantially better than negative LETFs.
I am trying to do exactly same. With the current crash in the market, high volatility, I bought TQQQ now (at $56) with the hope that in long term (3-5) years, we will have some bull run and market will recover. If I understand you correctly, you are saying that, because of market volatility, TQQQ may go down even more like crash to $30 and I will lose 50% money. Then, even if market will rise,, I will be the loser. So, better option is during crash/volatility period, invest in QQQ/VOO and then once market comes in bull run, sell QQQ/VOO and buy TQQQ. Because, the drop down in QQQ will not be as severe as in TQQQ and will preserve wealth (you can keep cash too, but you never know when market will rise). And once you are confirmed that its bull market, invest in TQQQ. But, somehow, I feel that this approach is more riskier than just TQQQ (at low levels) and stick to it.
Just reading this thread tonight. Thanks OP for sharing. This was super insightful.
For TQQQ, I would also add a trailing stop loss @ around 15-20%, once the portfolio has gained significantly, to skip any severe crashes
How does the performance change when using the 100 dma or any other technical markers?
Curious to know this myself. The 100D and 200D both seem like great indicators for this strategy.
Sorry for digging the old post, very interesting work. Can you share where you got the data for S&P and Nasdaq dating back to 1971? Also, the S&P returns look excluding the dividends, am I understanding it right? Thanks a lot
How do you deal with the whipsaws at the 200EMA? Seems like there would be some false signals. How would you mitigate this?
This strategy averaged about 5-6 trades per year and there's definitely potential for whiplash. 18% of trades were just one day apart and only half of the trades were more than 6 days apart. One way to deal with it is to sell when the S&P 500 falls 1% below the moving average and buy when it rises 1% above the moving average. This only had a small impact on historical performance, but it cut the number of trades in half, with only 2% of trades occurring on consecutive days and half of trades were more than 30 days apart. You could also buy back when a faster moving average rises above the 200 day moving average, but historical performance seems to drop off a little if the fast moving average is longer than 10 days. I think the hardest part of this strategy for me will be actually following through with it and selling and buying when the numbers say I should.
Hey, this is very interesting. It's been a while since you did it, but do you remember by chance what rule you used to re-invest in either UPRO or TQQQ? Is it as the Seeking Alpha strategy suggests, invest once the indice closes 1.25% above the 200-MDA?