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It is hard to find yellow momentum bars in uptrend stocks. IBM is currently yellow.

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It is hard to find yellow momentum bars in uptrend stocks. IBM is currently yellow.

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Big crashes are unfortunate. I hope greater crashes will not happen. TQQQ's primary objective is to provide amplified returns, in relation to the Nasdaq 100. TQQQ serves as a vehicle for those who are extremely bullish on QQQ or the tech sector. On the other hand, SQQQ is a leveraged inverse ETF, and aims to provide three times the inverse of the Nasdaq 100 Index's daily performance.It was onlya few weeks agowhen the index crashed 10% in a single day. I think it's possible for QQQ to crash perhaps 20% to 30% in a day, at some point.

Fortunately, shares of Uber (NYSE:UBER) gained 20% in May 2020. The stock gains have much to do with "better than expected" first-quart...

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So they say TQQQ is for day traders or swing traders, but not for long investors. They say that's because of the decay / volatility drag / leverage / whatever you call it.

Then, they show a graph like this, which I've reproduced. That's the graph of IXIC for 5040 days starting on February 1, 2000, near the peak before the crash. 5040 trading days is about 20 years, which gets us to February 11, 2020.

The stock price is IXIC but starting on a basis of 1$. The main graph shows in orange the total return for the money invested on February 1, 2000. The yellow line shows the total return for a 3X daily IXIC. The gray line is simply the "direct" line if daily returns would've been the same every single day. The dotted blue line is the difference in percent between the yellow line and the orange line.

Yup, that's true, you've lost most of the money you invested on that specific day (February 1, 2000). That's true, if you currently have 1 000 000$ in your whole account and you plan to buy a 3X daily, that may not be a good move. 5040 days later, the IXIC is at +140% while the 3X daily IXIC is at -65%.

But what if you simply started investing on that date (February 1, 2000)? And then, since you believe tech will always bounce back, you just kept the cash flow no matter what? Let's say you invested 1000$ on February 1, 2000 and then another 1000$ every 20 trading days (about every month). Note that in this case, the main graph is the total value of the portfolio in dollars.

Oh, that's a different picture! You've invested a total of 253 000$ over 20 years and that money would be worth 900 000$ for IXIC while it would be worth 4 220 000$ for the 3X daily IXIC. Moreover, it was mostly even with IXIC during the 14 first years, then it started beating it.

Ok, one last scenario. What if you invested a big chunk of money (200 000$) on February 1, 2000, and then you invested 1000$ every 20 trading days?

Well, you've lost most of that 200 000$ on the 3X daily IXIC, that's for sure. You've invested a total of 452 000$ over 20 years (200 000$ as an initial investment, then 252 000$ distributed evenly). That money would be worth 1 380 000$ for IXIC and 4 290 000$ for the 3X daily IXIC. By comparing the previous scenario, one can note that the initial investment 200 000$ was mostly lost since the overall return is barely any different. In fact, the difference is 70 000$, which fits with the -65% applied to 200 000$. Yet, the overall value of that 3X daily IXIC portfolio is still more than 3x the final value of IXIC. It took 14 years to break even with IXIC before beating it, though.

This is just an observation, not a financial advice. Past results does not guarantee future results. My personal conclusions? Well, I've also made many 100% fictive scenarios over 20 years and over the long term there can be many cases where IXIC will beat the 3X daily IXIC, but if you have a realistic goal, you may end up selling at huge profit a portfolio using a 3X daily before it collapses again. But one must be prepared to be underwater for many years. Does that mean it's a good strategy? You decide. I'm not saying that I recommend it. In some sense, buying a 3X daily is not worst than buying a high beta stock. For instance, DOO.TO has a high beta and dropped -75% during the COVID. But a high beta also means a quick come back for a growth stock. I bought it in mid-April and doubled my money by the end of May, 6 weeks later.

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What would've happen if someone had invested money in SP500 back in 1928 and never touched it again, nor invested more money?

Well, in the GSPC scenario, he would end up today with a total return of +17900% (or x180) which is a CAGR of 5.79%. In the scenario of a 3X daily GSPC, he would end up today with a total return of +19800% (or x199) which is a CAGR of 5.91%. That means his final value with the 3X daily GSPC would be +10.43% higher than the GSPC. Was it worth it? Not really, I guess. But meanwhile a 3X daily GSPC would have kept him underwater for many years compared to GSPC, it also comes with opportunities. Maybe at some point in time, he would decide he had enough money and sell. There would have been opportunities like the dot-com bubble in 2000 where he could've sell the 3X daily GSPC for more than twice as much compared to GSPC. Though maybe he got old before 2000 and wanted to sell in the 1980's with a total return about 1/4th of GSPC, or even 1/5th, or even only 1/10th... It is also worth noting that the idealist gray line (if you had the chance to find a secure savings account giving 5.79% CAGR compounded daily for 92 years), your total value would've been higher than GSPC and 3X daily GSPC 91% of the days. Good luck finding such a savings account though.

But again, where it gets interesting is... what if you had been committed to a cash flow every 20 trading days (about every month)? Let's say you start back in 1928 investing 65$ every 20 trading days. Then, each 252 trading days (about a year), you'd increase that cash flow by 3%, which represent the US inflation from 1928 to 2020. (That will lead us to a cash flow of 984$ in 2020)

During those 92 years, you would have invested a total of 390 250$. Invested in GSPC, it would worth 11 680 000$. Nice, as of today, you are now a multimillionaire, congratulations! What about if it had been invested in the 3X daily GSPC? What if it was in that idealistic savings account giving 5.79% CAGR compounded daily for 92 years? It would worth 5 000 000$. This time, it was not the better choice! But then, what about the 3X daily GSPC? Let's see... it would worth 1 100 000 000$. Yup, that's over ONE BILLION. Though, there were many consecutive years where the total return of the 3X daily GSPC was up to even -80% below the GSPC up to about 8 years underwater when compared to GSPC. But starting around the 1950's (after the Great Depression), the total return of the 3X daily GSPC has never been below GSPC. This basically means about 20 years under-performing and about 70 years over-performing. It would need a rolling returns analysis, though. That's only one case. I'm not saying I'm recommending investing in TQQQ for long because one can be underwater for 10-15 years. It's just an observation.

Another scenario to consider. If for the next 25 years, the S&P 500 stays exactly were it is right now (flat-lines at 3185), which is possible (it happened during the great depression), SPY would gain 55% (total compounded) from dividends (minus ER) but UPRO would lose 15% compounded from ER (minus dividends received). Those were nominal figures. If one factors in inflation, SPY would have lost 6% in real terms (total and compounded), a pity but not a death knell. On the other hand, UPRO would have lost 91% in real terms. Rebalancing and DCA would benefit UPRO more, but it would not be easy to rebalance after a horrific monday October 19, 1987. Most people cannot tolerate that kind of volatility.

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Sometimes I think that I want to start using leverage, but I don't think I would enjoy the extra volatility.Rebalancing and DCA would benefit UPRO more, but it would not be easy to rebalance after a horrific monday October 19, 1987. Most people cannot tolerate that kind of volatility.

Even the COVID crash was somewhat stressful for me. For pure stocks it was a roughly 28% drawdown. With my low risk approach, it was only a 13% drawdown... much better. But of course stocks don't crash when the world is doing great, so there is always more stress than what we think. Real market crashes aren't just charts on a screen that you look at while calmly sipping coffee.

Real crashes are situations where it looks like the end of the world, or the end of the financial system, or the end of

The COVID crash (#1) reminded me that I'm taking enough risk. I was able to stick with my allocations through the event and not disrupt my plans. I absolutely

Happy with 13% drawdown, 7.9% CAGR over the years, and +12% year to date. The risk parity approach (which I've been posting about incessantly for years) has proved, yet again, that it works. It handled the 2018 correction well too, but 2020 was a far better demonstration.

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906 Posts

By the way, HQU.TO is a CAD-traded 2x NASDAQ-100.

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So far am up $65,572.70 on my "risky" TQQQ trades since March. You win some, you break even on some. In the meantime my "safe, secure, dividend paying stocks" (Johnson and Johnson and CVS) are down $3230 year to date.

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It will be interesting to see if this uptrend is over. But remember, everyone on earth is trying what you're trying, so it's a crowded trade. Trying to ride the QQQ uptrend with a tight stop is one of the most popular trades on earth.I'm now out of my TQQQ trade. Last trade, got in @ 111 on the 16th, got stopped out @ 111 yesterday. TQQQ appears to be breaking downward. Is this the end of the uptrend that started last March? Time will tell, in the meantime I am flat on the trade.

Short term results can't really be compared to passive strategies, as these results only materialized over much longer time horizons. You could potentially do much better trading TQQQ this year than any other investment method.

I am sticking with a passive asset allocation plan because I strongly believe it will do better in the long term (multiple years) than any kind of active trading strategy. So far, I've gotten 8% CAGR over 4.3 years with only a 15% drawdown during the COVID crash, and minimal drawdown during the 2018 correction too.

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