quantifiedstrategies.com - Triple leveraged ETF trading strategy 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:

The Portfolio: Establish a portfolio consisting of an equal dollar amount of TQQQ and TMF (the triple leveraged ETF linked to the 20+ year treasury bond).
The Mechanism: This strategy works because equity TLETFs (like QQQ, SPY, and DIA) are generally negatively correlated with TLT (the underlying index for TMF).
Rebalancing: The strategy requires bimonthly rebalancing (every two months), which was found to be the optimal interval based on backtesting.
Crash filter: If TQQQ drops 20% or more in a single day, exit both TQQQ and TMF. Move 100% into IEF (a 7-10 year Treasury ETF). Stay there until TQQQ recovers and exceeds its pre-crash price. Then return to the 50/50 split.

Strategy Performance Results

Over the 10+ years of TQQQ’s existence, the 50/50 TQQQ/TMF bimonthly strategy achieved a total return in excess of 5,800%. The resulting CAGR was 44.9%.

Critically, the maximum EOM drawdown was significantly reduced to less than 25% (specifically, 24.5%). This is roughly half the drawdown observed for TQQQ alone (49.1%).

Lewis Glenn authored