TQQQ Volatility-Scaled Trend Strategy (1 day chart) by Addy10002
By Addy10002
Performance Metrics
- Author: Addy10002
Description
Personal note: This strategy took me a long time to come up with, it has quite a few moving parts working in tandem. This is my first ever published strategy. Any feedback and or criticism is welcome, and if you figure out a way to improve it even more, please share in the comments. Hopefully this inspires people to publish some of their best work open source so that we can all learn and benefit from each other.TQQQ Volatility-Scaled Trend StrategyA rules-based strategy for TQQQ (3x leveraged QQQ) that combines a trend/RSI signal system with a volatility overlay that scales position size up and down.Direction — five statesEach day the strategy sits in one of five states, driven by QQQ's 200-day SMA (with buffer zones) plus RSI:Bull long — QQQ is above its 200-SMA and momentum confirms → long TQQQ at 1.25x.Overbought short — QQQ's RSI runs hot during a bull regime → short TQQQ at 3x until it cools off.Bear bounce — QQQ is below its 200-SMA and TQQQ is oversold → a short-lived long at 1.5x to catch the bounce.Bear short — QQQ is below its 200-SMA and not oversold → short TQQQ at 1.5x.Flat — none of the above → cash.A faster 50-day SMA check lets it flip in or out of a bear regime a bit earlier than the 200-day alone would. A kill-switch also halts new trades if the strategy's own drawdown breaches a set threshold, and only re-arms once the market is back in an uptrend.Sizing — the volatility overlayOn top of the direction signal, the strategy adjusts how much to hold based on realized volatility. It compares a fast (10-day) and slow (60-day) volatility reading, takes the worse of the two, and sizes the position to target a chosen annualized volatility level. Cuts happen instantly when volatility spikes; increases back to full size happen gradually — so it delevers fast and relevers slowly. Exposure is also rescaled continuously while a position is held, not just at entry, since a fixed share count drifts out of line as equity moves.PerformanceWalk-forward, out of the system's own fit period (2005–2012): 37.3% CAGR, -54.6% max drawdown.Dot-com stress test (1999–2009, synthetic 3x QQQ): +10.2% CAGR, -74.2% max drawdown.The trade-offThis is a drawdown-reduction overlay, not a return booster — it costs some modern-era upside to survive the bad decades. The Target Volatility input is the dial: lower settings (e.g. 0.55) give the most protection at the cost of more return; higher settings (e.g. 0.90) keep more return but with a bigger tail risk.How it's meant to be usedEven with the vol overlay, this is a leveraged instrument holding a leveraged instrument — it's not a core portfolio position. It's designed to be run on a small slice of capital (roughly 10–30%) alongside a normal diversified portfolio, as a satellite allocation aimed at boosting overall returns rather than replacing your base holdings. Sizing it any larger defeats the purpose of the drawdown control built into the strategy.Shared for educational purposes — not financial advice. Past performance, including backtests, doesn't guarantee future results.