How to Trade the QQQ and TQQQ in 2023

Last Updated on January 31, 2023 by Mark Ursell

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.

  1. 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.
  2. I subtract today’s ratio from yesterday’s ratio. This gives me the 1-day rate of change (ROC).
  3. When the ROC is positive, the ratio is moving higher, and I buy the QQQ or TQQQ.
  4. When the ROC is flat or negative, the ratio is moving lower, and I do not buy the QQQ or TQQQ.
  5. I exit trades using a profit target and the Tradinformed Strength Close.
TQQQ chart showing a 200% gain between November 2020 and November 2021

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.

Indicators

  • 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)

Entry Criteria

  • Enter Long Any Time When Ratio Rate of Change > 0 And No Other Trades Are Open

Exit Criteria

  • 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)

Optimizer Results

I recently used the optimizer to compare the entry-level (ratio rate of change) against the EMA length. You can see the results below.

QQQ-SPY Trading Strategy Optimizer Results

Conclusion

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.

Tradinformed Backtest Models are developed by traders for traders. Get the trading ideas, strategies and tools to take your trading to the next level.

Learn more about how to get started here: Tradinformed Membership

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