Last Updated on January 31, 2023 by Mark Ursell
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Do you want to trade the QQQ and TQQQ in 2023?
These are two of the most popular ETFs for traders. And with good reason, they have performed incredibly well over a long time. And not only this, they are great for traders – they trend strongly and smoothly.
In this article and video, I explain my QQQ trading strategy that I first developed in 2016: Invest Profitably Using Relative Strength.
I will give you the complete strategy guide, including the entry and exit parameters. And also how I optimized the stop-loss and tested the TQQQ. Read on to learn more.
Watch the Video To See Me Demonstrate The Strategy
I recorded a video to give you an in-depth explanation of the background of the strategy and my recent changes and improvements.
In the video, I discuss the following:
Strategy Explanation and Description
The strategy measures the ratio of the QQQ and SPY.
- I divide the 100-day EMA of the closing price of the QQQ by the 100-day EMA of the closing price of the SPY. This gives me the relative strength ratio.
- I subtract today’s ratio from yesterday’s ratio. This gives me the 1-day rate of change (ROC).
- When the ROC is positive, the ratio is moving higher, and I buy the QQQ or TQQQ.
- When the ROC is flat or negative, the ratio is moving lower, and I do not buy the QQQ or TQQQ.
- I exit trades using a profit target and the Tradinformed Strength Close.
My Recent Strategy Optimizations
With a Tradinformed Backtest Model, you can use the optimizer to refine your strategy and optimize your results.
Optimizing The Entry Level
I believed the strategy would perform better if I got into trade earlier. But I needed to test my idea to check whether this was true. And secondly, if this is correct, what was the best entry level?
Optimizing the EMA
I also decided to check whether the 100-period EMA was robust. I have used 100 periods since 2016, but I want a robust strategy. This means the strategy should be profitable with a range of similar values.
So I used the optimizer to check whether a range of EMAs would still be profitable.
Testing the TQQQ – Does The Leveraged TQQQ Perform as Well as the QQQ?
This article is about how to trade the QQQ and TQQQ. I knew the strategy performed well with the QQQ, but I wasn’t certain how it would do with the TQQQ.
To test the TQQQ, I used data since its inception in 2010. I kept all the settings exactly the same, but I increased the size of my Profit Target and Strength close by 3x.
The results showed the TQQQ performed very similarly to the QQQ.
Trading Strategy Optimized Rules
The rules I use to trade the QQQ and TQQQ are shown below. These rules include the changes I explain in the video.
- 100-period EMA of QQQ and SPY ETFs
- Ratio of 100 EMA of QQQ and SPY (QQQ 100 EMA/SPY 100 EMA)
- Ratio Rate of Change (Current Period – Previous Period)
- Enter Long Any Time When Ratio Rate of Change > 0 And No Other Trades Are Open
- 6 * ATR Profit Target
- Tradinformed Strength Close
- When Trade Is In Profit – 3 Consecutive Bars of At Least 0.75% Gain Per Bar (2.25% gain for the TQQQ)
- When Trade Is In Loss – 1 Consecutive Bar of At Least 0.5% Gain (1.5% gain for the TQQQ)
I recently used the optimizer to compare the entry-level (ratio rate of change) against the EMA length. You can see the results below.
I love this strategy, and it has been reliable over a long period – I’ve been trading it since 2016. But the markets can always change. Trading a broad range of strategies and markets will diversify your returns and help protect you from drawdowns.
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