u/Nautique73 ·
Reddit — r/algotrading
· August 01, 2026 at 13:09
· ⬆ 15 pts
· 💬 10 comments
| View on Reddit ↗
AI Summary
Summary
Post describes a 3-factor leveraged model (momentum + breadth + volatility) for timing QQQ, QLD, and TQQQ exposure, backtested from 1999–2026.
Author’s thesis: strict risk gates can outperform buy-and-hold leveraged ETFs by avoiding crash periods and controlling volatility decay.
Quality assessment: Well-structured, cycle-tested DD with transparent rules, but self-reported backtest with potential overfitting and synthetic leverage concerns; not a live-tracked signal.
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Hey everyone,
First off, a huge thanks to everyone who chimed in on the last post. The constructive pushback regarding Sharpe ratios, post-2009 recency bias, and index-breadth survivor concerns led to a complete structural overhaul.
Instead of relying solely on breadth for binary entries, the model now runs on a strict 3-Factor (3F) framework that pushes the backtest all the way back to June 1999 surviving both the Dot-Com crash and the 2008 GFC.
# The Updated 3-Factor Rules
1. **Factor 1 — Momentum (In / Out Binary Gate):** Exits to 100% cash when intermediate trend health (0.7 x 6mo + 0.3 x 12mo) drops below the risk-free rate, or if 3-month annualized return drops below zero.
2. **Factor 2 — Breadth (Internal Leverage Sizing Dial):** Once invested, MMFI breadth acts strictly as an internal throttle (>=60% use 3x TQQQ; < 40% use 2x QLD; hysteresis in between).
3. **Factor 3 — Volatility (The Crash Brake):** An objective override that forces an immediate exit to 100% cash whenever 6-month realized QQQ volatility exceeds **30%**, cutting off volatility decay before it starts.
# Backtest Results (June 1999 – July 2026)
Covering full market cycles including the 2000 Dot-Com wipeout, the 2008 Financial Crisis, 2020 COVID, and the 2022 rate shock on a monthly close rebalance:
|**Metric**|**3F LDM Strategy**|**QQQ Buy & Hold**|**QLD (2x)**|**TQQQ (3x)**|
|:-|:-|:-|:-|:-|
|**CAGR**|**29.6%**|10.3%|9.4%|1.9%|
|**Max Drawdown**|**-37.4%**|\-81.1%|\-98.5%|\-99.96%|
|**Sharpe Ratio**|**0.87**|0.45|0.39|0.37|
|**Win Rate (Per Trade)**|**70.4%**|—|—|—|
**Regime Drawdowns (Strategy):**
* **2000–2002 Dot-Com:** **0%** (Vol & momentum gates stepped to cash early)
* **2007–2009 GFC:** **-14.6%**
* **2020 COVID:** **-35.1%**
* **2022 Rate Shock:** **-17.2%**
# Current Status (July 2026 Close)
* **State:** **Cash (0x)**
* **Active Trigger:** 6-month realized volatility hit **31.2%** (crossing above the 30% threshold), cleanly overriding risk-on positioning following recent market choppiness.
I tested all sensitivity tested all thresholds in varying regimes and confirmed they are neither at a local optimum or on a sharpe spike. Appreciate all the feedback on the last thread.
Current model state is 100% cash because 6-month realized QQQ volatility is 31.2%, above the 30% crash-brake threshold. High realized volatility amplifies leveraged ETF decay, so the model systematically removes 3x exposure when this brake triggers. Avoid TQQQ until volatility falls back below 30% and momentum/breadth factors re-confirm risk-on conditions. Volatility can drop quickly; the model may miss an initial rally if it re-enters too late; backtested edge may not persist live.
The model uses QLD only when breadth is below 40% but still risk-on; the volatility override currently blocks all leveraged exposure. Since the crash brake is active, the model is not holding 2x exposure either, implying no edge in QLD under current volatility regime. Avoid QLD as well; wait for volatility to normalize and for the model’s breadth throttle to re-engage. QLD could rally if volatility mean-reverts sharply; the author’s threshold calibration may not be robust to new regimes.
This Reddit post, published August 01, 2026,
features u/Nautique73
discussing TQQQ, QLD.
2 trade ideas extracted by AI with direction and confidence scoring.