How the TQQQ Breadth Flip System Works

How the TQQQ Breadth Flip System Works

April 11, 2019 2 By Jeremy

Trading the TQQQ can be a risky trade. It moves up or down at a rate of approximately three times what the Nasdaq 100 (QQQ) trades.

It can also be very rewarding and make traders a lot of money, if traded with a good system. Readers of Robotic Investing can become members to get access to this system.

The TQQQ Breadth Flip System

The system available for members uses a series of market breadth statistics to determine the best time to be in TQQQ, and the best time to be in cash.

Using primarily Amibroker with Norgate data, a series of calculations are done on over 5000 stocks traded on the U.S. stock market. With this data, I have created a proprietary indicator that tells me whether it is a good time to hold TQQQ, or too risky.

The results are being in cash when TQQQ is trending down, but most importantly holding TQQQ when it is trending up.

This is much more complicated that using moving averages or relative strength to determine the trend. My research and experience has told me that that does not work. In fact I have tested that with Amibroker extensively and determined moving averages actually hurt performance when used on the TQQQ.

Instead, this system looks at the ratio of over 5000 stocks that are moving up and down during multiple time periods, with specific volume filters to create an indicator. When a breadth flip happens – the indicator goes above 1 – the system buys TQQQ until a negative breadth flip happens again. This has been proven through multiple backtests, walk-forward analysis, and Monte Carlo simulations to be the best time to stay invested in TQQQ.

When the inevitable negative breadth flip happens again, TQQQ is sold and the system goes to cash. This protects capital and maintains gains.

What Does this Breadth Flip Look Like?

To give you an idea of what a breadth flip looks like, the chart from Amibroker below provides a visual representation.

As you can see, the red arrow (October 5th) in the upper panel is a sell signal as the ratio in the bottom panel drops below 1. The system goes to cash when the market is dropping hard, protecting capital and keeping risk to a minimum.

Moving forward to January 9th, a positive breadth flip happens and TQQQ is purchased the next day on January 10th. That purchase is indicated by the green arrow on the upper panel at a price of $40.62.

TQQQ Breadth Flip System
(Click for Larger View)

Since January 10th the ride up in the TQQQ has been very positive and investors who took that trade have been rewarded.

Recent Trade Performance

As an ongoing feature of Robotic Investing, I am going to track the performance of the TQQQ Breadth Flip. Make sure you subscribe so you can get regular updates on the performance.

As you can see from the chart above, TQQQ was purchased on January 10th at a price of $40.62. The system is still in the trade and is handily beating the S&P500.

Like the other systems tracked on Robotic Investing, here is what the portfolio value and performance looks like since January 2019.

Portfolio Value

Portfolio Performance

This is a trade I am currently in as well and achieving my objectives of beating the S&P500.

Is this the only strategy in my portfolio? No. I have other systems I trade as I want to build a portfolio that is diversification and well balanced. That is just good portfolio management and best practice.

However, based on positive backtested results and as this most recent performance shows, it is a system that is worth considering. Even if you only want to put a small percentage (~5%) of your portfolio to work in this strategy, this recent trade would be moving the needle for your portfolio value.

How to Sign Up

If you are interested in giving the system a try, head over to this page to learn more. You will get nightly signals from the system allowing you to decide to take the trade the next day or not.

If you subscriber to this system, you also get access to my other TQQQ system, including signals for that system.

Click Here to Learn More

Feature Image: The 3B’s – Singapore