Short-locating QQQ vs. Buying PSQ - Novice Day Trade Help

[Snuskpelle]

With TQQQ & related leveraged strategies you're far best off backtesting what you're doing.
TQQQ is great for swings in a strongly bullish regime. Sure enough it's going to crash at some point, so buy & holders who don't know what they're owning will be left holding empty bags. I don't really think anyone should be nannying them though.

 

[Sig]

I'm looking for bounces mainly in SQQQ TZA if market drops, or breakouts in SPXL TNA if market goes up, for daytrading. The leveraged ETFs are very risky, best for very experienced daytraders imho

If you're only trading intraday than just putting on a position 1/3 the size you otherwise would with TQQQ is the same as trading QQQ. The tracking error is small enough to be a non-factor in that fund and there's no risk as long as you resist the temptation to put on a position 3X larger than you otherwise would have just because you can.
Trading overnight, on the other hand, will bite you in the behind fast if you don't understand that the ETF returns 300% of the daily return of QQQ and so over more than a day it will almost certainly not return 300% of QQQ.

 

[shatteredx]

If you're only trading intraday than just putting on a position 1/3 the size you otherwise would with TQQQ is the same as trading QQQ. The tracking error is small enough to be a non-factor in that fund and there's no risk as long as you resist the temptation to put on a position 3X larger than you otherwise would have just because you can.
Trading overnight, on the other hand, will bite you in the behind fast if you don't understand that the ETF returns 300% of the daily return of QQQ and so over more than a day it will almost certainly not return 300% of QQQ.

TQQQ has actually returned more than 300% of QQQ in the past five years.

QQQ 5-year return: 174% (3X is 522%)
TQQQ 5-year return: 691%

 

[nitrene]

If you go back 5 years to 9/30/2015 I see the following:

QQQ: Up 174%
TQQQ Up 899% (14.53 --> 130.69)

I believe the returns should be geometric so it should have been 2.74^3 = 20.57 or 2057% so it actually under performed by ~ 1100% which makes sense since it had 2 huge drawdowns of 60% (12/2018) & 73% (3/2020).

 

[Sig]

TQQQ has actually returned more than 300% of QQQ in the past five years.

QQQ 5-year return: 174% (3X is 522%)
TQQQ 5-year return: 691%

Thanks for pointing that out, especially salient given that so many people incorrectly call this "decay". About the only thing you can say with certainty about leveraged funds that provide a daily percentage return is that they'll almost never provide exactly their leveraged return over the long run. Depending on how smooth or volatile the index is they can either provide less or more because of the daily return feature.

 

[shatteredx]

If you go back 5 years to 9/30/2015 I see the following:

QQQ: Up 174%
TQQQ Up 899% (14.53 --> 130.69)

I believe the returns should be geometric so it should have been 2.74^3 = 20.57 or 2057% so it actually under performed by ~ 1100% which makes sense since it had 2 huge drawdowns of 60% (12/2018) & 73% (3/2020).

Yeah, you're right, it should be closer to 900%. Not sure why the number I got from etfdb is so off.

 

[lbhere]

Check this out...

Warning: Do NOT hold the TQQQ Nasdaq ETF for the Long-Term

Let us be clear, we are discussing the largest casino on the planet earth right now. The 3x Levered, ProShares UltraPro QQQ should come with a surgeon general’s public warning. All one has to do is look at the average trading volume – nearly $5.5B a day for this ETF. It makes the Wynn casino empire’s annual revenues of $6.6B look like child’s play.

We are talking about a borderline scam here? It’s a mathematical fact that this beast is NOT long for this world. Sustainability is the question. It’s a high stakes game of musical chairs, DON’T get caught holding the bag.

https://www.thebeartrapsreport.com/blog/

Arnie, that is very thoughtful of you to take the time to post all of this for me. Thank you very much.

I have done some research myself regarding the leveraged ETF and was familiar with these problems. From what I understand, it also gets recalculated each day as well.

I would only be trading on a daily basis, rarely in for more than an hour tops...usually for a much shorter period of time. In and out, in and out. In fact, I am a bit too cautious sometimes and I don't let my earnings run as far as I should. But I am pretty diligent at cutting the losses where my plan dictates.

You gave me a big reminder. Thank you.

 

[lbhere]

As long as you're day trading it like you mentioned it's fine. Also we're discussing using it as an intra-day short vehicle, when QQQ is hard to borrow.

Yep.

And I realize that I misunderstood you earlier. You are still shorting. I was thinking you were going long on an inverse. My apologies.

I did take a look at the inverse ones, and the 3'x short (SQQQ) was the only one that looked as if I could trade it well. It seemed to track well.

I'll take a look at the two you mentioned and think about shorting.

 

[lbhere]

welcome.

im not going to comment on your specific strategy, but unless you are well versed on 3x ETFs I would not recommend trading them especially if you are holding overnight. Best bet would be to contact your broker not sure why the Qs wouldnt be available.

best of luck

Thank you for your answer.

 

[lbhere]

If you're only trading intraday than just putting on a position 1/3 the size you otherwise would with TQQQ is the same as trading QQQ. The tracking error is small enough to be a non-factor in that fund and there's no risk as long as you resist the temptation to put on a position 3X larger than you otherwise would have just because you can.
Trading overnight, on the other hand, will bite you in the behind fast if you don't understand that the ETF returns 300% of the daily return of QQQ and so over more than a day it will almost certainly not return 300% of QQQ.

Got this. Yes. Thank you.