Leverage Dual Momentum (LDM): A 24-Year Backtested Quant Strategy for Nasdaq-100 (QQQ/QLD/TQQQ)
u/Nautique73 ·
Reddit — r/algotrading
· July 30, 2026 at 19:53
· ⬆ 17 pts
· 💬 15 comments
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AI Summary
Summary
Post presents a quantitative strategy (LDM) for Nasdaq-100 using breadth and momentum to rotate between cash, 2x QLD, and 3x TQQQ.
Author's thesis: The systematic rules capture tech upside while reducing drawdowns, backtest shows 27.5% CAGR vs 13.3% for QQQ buy-and-hold.
Quality: Well-researched DD with 24-year backtest and walk-forward validation; not speculation.
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Hey everyone,
Sharing a systematic, quantitative asset allocation model built around Nasdaq-100 breadth (MMFI) and momentum, designed to capture tech secular upside while cutting severe drawdowns via a strict cash/leverage throttle.
The core engine is fully deterministic, operates on a monthly close rebalance, and has been rigorously stress-tested across 24+ years of data (Jan 2002 – Jul 2026), including walk-forward validation and numerous structural variant tests.
# Core Mechanics & Rules
The strategy rotates between four distinct states based on Nasdaq breadth thresholds and intermediate trend health:
1. **State 1 (100% Cash / T-Bills):** Parked in money markets when trend/momentum rules trigger an Exit.
2. **State 2 (2x QLD):** Intermediate posture when breadth is recovering or stabilizing.
3. **State 3 (3x TQQQ):** Full risk-on exposure scaling up to 3x TQQQ exposure when broad tech participation is robust.
**Primary Rules:**
* **Exit Trigger:** If the (70% x 6-month return + 30% x 12-month return) trend drops below the risk-free rate (or 3-month return < 0), the model dumps leverage and drops to 100% cash (State 1).
* **Re-entry Gate:** When in cash, re-entry triggers if 3M annualized return > Risk-Free Rate and breadth is >50% (State 2).
* **Leverage Scale-Up:** Scales to State 3, 3x (TQQQ) leverage when breadth is >60% and back down to State 2, 2x (QLD) when breadth is <40%.
# Backtest Results (2002–2026)
Tested across multiple full-market cycles (2008 GFC, 2020 COVID shock, 2022 rate bear, 2023–2026 tech cycles):
|**Metric**|**LDM Strategy**|**QQQ Buy & Hold**|
|:-|:-|:-|
||
|**CAGR**|**27.5%**|13.3%|
|**Max Drawdown**|**-40.8%**|\-49.7%|
|**Sharpe Ratio**|**0.81**|0.65|
|**Monthly Win Rate**|**73.1%**|—|
I tested many different model variants and also did a rolling walk forward testing against OOS to avoid overfitting the parameters. Appreciate your feedback.