No. of Recommendations: 22
https://www.quantifiedstrategies.com/triple-levera... has an interesting backtest I or we have talked about in part or something akin to it before.
The core proposal is a strategy designed to mitigate large drawdowns while retaining much of the upside performance:According to yahoo quotes, the top TQQQ daily losses were on these days:
-34.47% 3/16/2020
-27.41% 3/12/2020
-20.31% 3/9/2020
-18.31% 4/4/2025 <<<< Not -20%
These are all adjusted for dividends, not price-only. The figures come out the same either way.
So essentially that sell only triggered once, on 3/9/2020, so the sell would be on 3/10/2020.
(Funnily enough, 3/10/2020 closed up +15.56%.)
Anyway, TQQQ closed on 3/9/20 at 15.30749989.
The pre-crash price on 3/6/20 was 19.20999908
It opened 3/10/20 at 17.69000053, so that's where you would have sold.
The next open above 19.21 was on 5/18/20 at 19.2775001525878
Between those dates, the lowest close was 8.88 on 3/20/20. (That's -54% drop.)
So this strategy had you out of TQQQ/TMF for 49 days out of 3950 days.
You can do a backtest, except for the sell & buy signals.
https://testfol.io/?s=6OIvmhtuudA Be sure to check the "Logarithmic scale" box.
Eyeball the chart and draw a flat line between 3/10/20 and 5/18/20 on the TQQQ/TMF plot. During the same period, IMF was flat, value $16,720 to $16,718.
I'm sorry, but this simplistic backtest says that this strategy
SUCKS.It saved you from one (very large) drawdown at the cost of
$2 million!If you are going to put money on TQQQ you have to realize that you will have huge volatility and drawdowns.
MaxDD:
-82% TQQQ
-78% TMF/TQQQ
Another similar strategy I have read about is TQQQ/BTAL with annual rebalance. That one really reduces volatility and the MaxDD, -36% vs. -82% for TQQQ.
At the low, low cost of only $1,200,000.
https://testfol.io/?s=9eGpbHvey38Actually, that is better than TMF/TQQQ over the same period beginning 9/13/2013.
Ending at $314,500 vs. $147,300. At _lower_ MaxDD and similar volatility.
Sorry to rain on his parade.
This is an example of why you _MUST_ do your own backtests.
The writer of that article (Oddmund Groette) just accepted the claims of the originator (Lewis Glenn) at face value without checking anything.
The purported fact checker (Håkan Samuelsson) obviously didn't check anything further than spelling and punctuation.
It didn't do a heck of a job of "mitigate large drawdowns while retaining much of the upside performance". Dropped the MaxDD from -82% to -78% while giving only 13% of the return, and half the CAGR.
All together:
https://testfol.io/?s=0ersxbG9Ce9It took less than 5 minutes to create the backtest at testfol.io. It took longer to download the daily prices and plug that data into Excel to find the -20% days.
