The reason I use shorter time frame trendlines is because there are always waves in price movements, but there are not always long up trends like 2023 or 2021 where you can just walk away and let it grow. I want to regularly compound my investment and not depend on a bull market. I also want to avoid trading the inverse ETFs. Years such as 2000, 2001, 2002, 2005, 2008, 2011, 2015, 2016, and 2022 offered very little in terms of easy long trend lines. But there were several waves to be played. Buying and selling TQQQ during these years could have made > 100% profit while TQQQ was flat or -90%.
2023 should have been an easy year. It was the best year for TQQQ and TECL ever - even if you just bought and held for 1 year it was +200%. That almost never happens, and it would be foolish to think it can be repeated again in the next year.
Totally agree and that topic will be a future article. The compounding effect of a flat trading range can be phenomenal. That was the UVXY lesson from 2022, and with NG. This article and a few more coming, are focused on people who bought and held since whenever, and those who simply let their investments be managed by a financial advisor. These people would only be willing to take a 10 minute look once a week. Once I convince them of that opportunity for a massive improvement in results, then I can tell them about TQQQ and watching shorter time frames when the situation warrants. Plus, that will be my strategy when I'm living on the beach kitesurfing again.
A point I made to Dad yesterday is that QQQ looks like a double top with a long, long way to drop on the monthly view, but the 'big' drop in 2008 also looks like a tiny blip. Twenty years from now, the current crazy high might also look like a tiny move with it much, much higher.
It's great that you don't need to study hundreds of companies looking for promising growth opportunities, or worry about what might happen to these companies every quarter when earnings are reported. Because as much as you study and prepare for this, there is no guarantee the stock will even move in the logical direction following good or bad news. People say fundamentals matter eventually, but then you wait 3 years while the stock continues to slide down. Meanwhile you are wasting time waiting and could have been trading, compounding gains.
Generally when people buy individual stocks and the price goes down, they buy more because it is a better value. The author has written about this dollar-cost-averaging strategy or buy-the-dip which is a complete fallacy. Just look at a stellar company like PFE. The stock price peaked in 2000 then fell for 9 years. It didn't recover until 2021, and has again been falling for 2 years. Should you have bought the dip in 2022, or 2023? Well can you imagine buying the dip in 2001, 2002, 2003, 2004, 2005 (when is this going to end?) 2006, 2007, 2008? At some point you are out of money to buy the dip.
Instead, learn to sell losers at the first sign of trouble (trend break) and move on to something else. Or be willing to buy it again later when it breaks the down trend.
Well said. People also say they like to invest in good companies. These companies don't care who is holding their shares, and there is no badge of honour for holding shares in any company. Yes, it's great to be able to say you bought shares in AAPL, NVDA, TSLA, whatever when it was $## and you made so many thousand percent, but the chart for the leveraged ETF, TECL, proves that leverage will get you a better return, even if you're lazy with both investments. Now that you understand it's best to not be lazy and simply check your single investment once a week, then there is no single company that will outperform TECL or TQQQ over time. Go back in time and try and find one.
Once I've hammered home these concepts to some more people, then I'll show how to apply the same strategy for going short with TECS, SQQQ or SOXS. My favourite, UVXY, is a completely different beast and I have written a lot about it already, and my last article covers just about all the small details.
If you want to invest in a good company, do it for a friend or child or grandchild, then help them directly by providing advice and support. The money from trading will continue to re-fill your account many times over, so neither you nor they need to worry about losing the money if the business fails. What's important is that they tried.
Some more thoughts on this strategy. The author has done a lot of great work, showing how he has struggled with advice from others and over the years, learned a better and simpler way to trade and invest. So why should anyone believe him? You don't have to. He makes it easy to go and review for yourself if these simple trendlines actually work. He has placed easy to understand charts for us to see.
About 2 months ago I decided to put this to the test and conducted backtesting on QQQ since 1999. My first attempt found that these simple trendlines actually avoided the 2000-2002 crash, and I would have come out of that way ahead instead of underwater. I further refined my trendline strategy based on this backtesting and now trade 100% of my account with 3X leveraged ETFs. I don't recommend it without doing due diligence because while it seems easy, people are emotional and make incorrect choices. Both the author and I have made trading mistakes by buying too soon or selling too early - and we continue to do so. Nearly every experienced trader continues to make mistakes based on guessing or emotions or news. But having a system like this as a goal, leads to much fewer mistakes.
Thanks for those kind words. And I'd like to add that Dad has kept asking why I haven't been making the trades correctly after all these years, and I explained that having the lines on the chart, extending into the future was the final missing piece to my puzzle. In my Oct. 29 update, I noted that QQQ had a higher low on Friday from Thursday, but I didn't have the line drawn on my active chart. Without that line, I was worried about FOMC on Wednesday. Seeing the line now, shows that it provided solid reassurance to simply buy and hold with a stop on a break of the line. That simple difference, and ignoring all news and thoughts, would have allowed me to catch the entire move. Today's move is back to a long term support line and seeing the early drop hit that line and bounce was another major confirmation of how effective they are. I also didn't have the portfolioadvisor site to calculate dollar returns.
It's also like the eskimo roll in a kayak that I didn't quite master this past summer. I know what to do and I was doing okay, but didn't master it. I would still chicken out and bail if I was underwater too long (30 seconds or less probably). I know I will master it this summer and I know I will trade effectively this year as well. I can also show people my concept, almost like a game, and have them decide when to buy and sell QQQ (or any stock) since 1999 (or whenever). Each person can write down their buy and sell prices, re-buy with all their capital and calculate who did the best at the end. You click forward week by week in seconds, and they have no idea what will happen in the 'future' weeks that aren't on the screen yet. They can then practice on their own to get better at decision making.
I have a support line through the Nov. 14 to 28 lows and later drew a parallel line above it through the early high (second hour) Nov. 14. I thought they might provide some guidance from a drop from the unsustainable steeper lines. The upper line matched the early bounces today and the lower line was near exact support late and rallied. Without the lines, it was in free fall with no idea where support might be. Next support is the old weekly resistance line from the first half of 2023 which was broken May 26. It's currently just under 394 today.
OK, maybe that was support, but it broke today. I tried to draw support today from 09NOV to 06DEC, and QQQ looks to have broken that as well. So I'll just stick with my standard rules of the highs for the las 3 days is the trend that needs to break.
I actually wouldn't have termed those lines as support, more like reference lines. Even the weekly line at roughly 394 wouldn't be support since that was the upper line of the channel for much of last year. There's really no rush to buy QQQ or TQQQ until a bottom forms, especially if one is only checking once a week. I'm just suspicious that this drop is a little contrived, immediately to start the year and pushing up steadily to close the year. Anyway, I wasn't expecting this quick opportunity to watch for a good entry for a larger position and for newcomers to the strategy.
Thanks for the interesting article. I have several comments/suggestions so I will start with the trend on the 04AUG chart. You show that QQQ broke that uptrend, which would have been a logical place to sell before it broke support. Once it broke, you can easily see how far it has to go to reach the next trendline. Everyone should be able to decide if it is worth the risk or just use a stop loss if it breaks. It would be helpful if you add another chart showing that lower trendline also broke in late SEP2023. By then a new downtrend had developed which thwarted the rally on 12OCT leading to a lower low, where everyone was sure we were in for a new dot-com crash.
The trendlines you have used are long-term trends allowing you to live your life. While I maintain the execution of this strategy is not quite as simple as the few trades you demonstrated, it can be almost that simple. For instance you might have been using a different trendline and sold instead in late Sept. Or perhaps sold early on 21JUN then had to try to get back in. Knowing to buy in late OCT required using shorter trendlines that would have had you also buying in early OCT, then selling for breakeven. Or worst-case you bought the break of the downtrend on 07NOV. Also, you will need to understand stop-loss orders because sometimes you will buy what appears to be the start of a rally, only to have another 10% drop (30% with TECL).
Either way, careful management of these trendlines has 2 major benefits. First, you can more comfortably use the leveraged ETFs. Second, you can get out early when there are signs of trouble. Holding these leveraged ETFs is extremely dangerous through bear markets. Holding through 2000-2002 dot-com crash or 2008 crash can drop a $10,000 investment down to $40. Then it takes a 25,000% gain just to break even again.
This article was kind of thrown together so my son had something to read after chatting and he was really interested in my ideas. I also wanted to get something out to close the year and the creative juices weren't flowing smoothly. On New Year's day, I went back to the first day for QQQ in March, 1999 and drew lines on the weekly chart in investing.com. One super interesting result was the drop of 83.6% from the 2000 high of 120.00 to the 2002 low of 19.68. By 2004 it was approaching 40 which looks like a tiny slow climb compared to the massive drop, yet the gain was 87.6%! Slightly more than the drop!
I showed that to Dad, then progressed week by week, asking when he would sell. That was really, really interesting. I chose to sell at 40 and he waited for about -3%. I was ready to buy on a move over 41. He then sold at 37 and I bought at 35 with a stop at 34. That left me sitting comfortably and waiting and him struggling as it went back to 37. This happened several times, at other points. It was a super useful exercise for him to make decisions, while seeing the lines (but not future reversal lines) and making decisions. Selling Feb. 2020 before covid was easy as it had popped above the resistance line and back sharply. He now understands that covid was simply an excuse for a pullback that was ready and waiting to happen.
Wit 2020, one could have sold on 24JAN, then back in 03FEB after the higher low was confirmed, or on 04FEB breakout above your sell point on 24JAN. Then you would have sold 21FEB or worst-case 24FEB for breakeven.
I like how we can devise multiple strategies with these principles and both come up with amazing gains, while protecting on the downside.
I spoke with 2 friends today and we looked at trend lines briefly. It was frustrating how they have been brainwashed by media as the conversation quickly went into how politics affects the markets. Something about how he wanted to be out of the market come election time in case so and so won/lost. The other friend got upset that a certain party always claims responsibility for market gains but never losses. Focus! That has nothing to do with this! It's also hard to understand their risk tolerance if there is a string of small losses that add up to -10% in a month, will they quit? I think getting started and getting a buffer of profits maybe 25% in the account is critical. But you can't predict how it will start.
I suggest you pick some odd stocks, like MCD and CAT, and go back in time with them and let them decide when to buy and sell. They likely won't have a bias then. Or, use QQQ but hide the dates to take away the bias. On a weekly view, QQQ broke upper resistance mid-Feb. 2020, then reversed. It was a classic time to sell as it was overextended and due for a drop. On Monday the next week, it gapped lower and fell on covid news. A Sunday review had you ready to sell if you hadn't already.
The reason I use shorter time frame trendlines is because there are always waves in price movements, but there are not always long up trends like 2023 or 2021 where you can just walk away and let it grow. I want to regularly compound my investment and not depend on a bull market. I also want to avoid trading the inverse ETFs. Years such as 2000, 2001, 2002, 2005, 2008, 2011, 2015, 2016, and 2022 offered very little in terms of easy long trend lines. But there were several waves to be played. Buying and selling TQQQ during these years could have made > 100% profit while TQQQ was flat or -90%.
2023 should have been an easy year. It was the best year for TQQQ and TECL ever - even if you just bought and held for 1 year it was +200%. That almost never happens, and it would be foolish to think it can be repeated again in the next year.
Totally agree and that topic will be a future article. The compounding effect of a flat trading range can be phenomenal. That was the UVXY lesson from 2022, and with NG. This article and a few more coming, are focused on people who bought and held since whenever, and those who simply let their investments be managed by a financial advisor. These people would only be willing to take a 10 minute look once a week. Once I convince them of that opportunity for a massive improvement in results, then I can tell them about TQQQ and watching shorter time frames when the situation warrants. Plus, that will be my strategy when I'm living on the beach kitesurfing again.
A point I made to Dad yesterday is that QQQ looks like a double top with a long, long way to drop on the monthly view, but the 'big' drop in 2008 also looks like a tiny blip. Twenty years from now, the current crazy high might also look like a tiny move with it much, much higher.
I said I would have many comments...
It's great that you don't need to study hundreds of companies looking for promising growth opportunities, or worry about what might happen to these companies every quarter when earnings are reported. Because as much as you study and prepare for this, there is no guarantee the stock will even move in the logical direction following good or bad news. People say fundamentals matter eventually, but then you wait 3 years while the stock continues to slide down. Meanwhile you are wasting time waiting and could have been trading, compounding gains.
Generally when people buy individual stocks and the price goes down, they buy more because it is a better value. The author has written about this dollar-cost-averaging strategy or buy-the-dip which is a complete fallacy. Just look at a stellar company like PFE. The stock price peaked in 2000 then fell for 9 years. It didn't recover until 2021, and has again been falling for 2 years. Should you have bought the dip in 2022, or 2023? Well can you imagine buying the dip in 2001, 2002, 2003, 2004, 2005 (when is this going to end?) 2006, 2007, 2008? At some point you are out of money to buy the dip.
Instead, learn to sell losers at the first sign of trouble (trend break) and move on to something else. Or be willing to buy it again later when it breaks the down trend.
Well said. People also say they like to invest in good companies. These companies don't care who is holding their shares, and there is no badge of honour for holding shares in any company. Yes, it's great to be able to say you bought shares in AAPL, NVDA, TSLA, whatever when it was $## and you made so many thousand percent, but the chart for the leveraged ETF, TECL, proves that leverage will get you a better return, even if you're lazy with both investments. Now that you understand it's best to not be lazy and simply check your single investment once a week, then there is no single company that will outperform TECL or TQQQ over time. Go back in time and try and find one.
Once I've hammered home these concepts to some more people, then I'll show how to apply the same strategy for going short with TECS, SQQQ or SOXS. My favourite, UVXY, is a completely different beast and I have written a lot about it already, and my last article covers just about all the small details.
If you want to invest in a good company, do it for a friend or child or grandchild, then help them directly by providing advice and support. The money from trading will continue to re-fill your account many times over, so neither you nor they need to worry about losing the money if the business fails. What's important is that they tried.
Some more thoughts on this strategy. The author has done a lot of great work, showing how he has struggled with advice from others and over the years, learned a better and simpler way to trade and invest. So why should anyone believe him? You don't have to. He makes it easy to go and review for yourself if these simple trendlines actually work. He has placed easy to understand charts for us to see.
About 2 months ago I decided to put this to the test and conducted backtesting on QQQ since 1999. My first attempt found that these simple trendlines actually avoided the 2000-2002 crash, and I would have come out of that way ahead instead of underwater. I further refined my trendline strategy based on this backtesting and now trade 100% of my account with 3X leveraged ETFs. I don't recommend it without doing due diligence because while it seems easy, people are emotional and make incorrect choices. Both the author and I have made trading mistakes by buying too soon or selling too early - and we continue to do so. Nearly every experienced trader continues to make mistakes based on guessing or emotions or news. But having a system like this as a goal, leads to much fewer mistakes.
Thanks for those kind words. And I'd like to add that Dad has kept asking why I haven't been making the trades correctly after all these years, and I explained that having the lines on the chart, extending into the future was the final missing piece to my puzzle. In my Oct. 29 update, I noted that QQQ had a higher low on Friday from Thursday, but I didn't have the line drawn on my active chart. Without that line, I was worried about FOMC on Wednesday. Seeing the line now, shows that it provided solid reassurance to simply buy and hold with a stop on a break of the line. That simple difference, and ignoring all news and thoughts, would have allowed me to catch the entire move. Today's move is back to a long term support line and seeing the early drop hit that line and bounce was another major confirmation of how effective they are. I also didn't have the portfolioadvisor site to calculate dollar returns.
It's also like the eskimo roll in a kayak that I didn't quite master this past summer. I know what to do and I was doing okay, but didn't master it. I would still chicken out and bail if I was underwater too long (30 seconds or less probably). I know I will master it this summer and I know I will trade effectively this year as well. I can also show people my concept, almost like a game, and have them decide when to buy and sell QQQ (or any stock) since 1999 (or whenever). Each person can write down their buy and sell prices, re-buy with all their capital and calculate who did the best at the end. You click forward week by week in seconds, and they have no idea what will happen in the 'future' weeks that aren't on the screen yet. They can then practice on their own to get better at decision making.
I don't see the support it bounced off today. Please describe where that line is for QQQ.
I have a support line through the Nov. 14 to 28 lows and later drew a parallel line above it through the early high (second hour) Nov. 14. I thought they might provide some guidance from a drop from the unsustainable steeper lines. The upper line matched the early bounces today and the lower line was near exact support late and rallied. Without the lines, it was in free fall with no idea where support might be. Next support is the old weekly resistance line from the first half of 2023 which was broken May 26. It's currently just under 394 today.
OK, maybe that was support, but it broke today. I tried to draw support today from 09NOV to 06DEC, and QQQ looks to have broken that as well. So I'll just stick with my standard rules of the highs for the las 3 days is the trend that needs to break.
I actually wouldn't have termed those lines as support, more like reference lines. Even the weekly line at roughly 394 wouldn't be support since that was the upper line of the channel for much of last year. There's really no rush to buy QQQ or TQQQ until a bottom forms, especially if one is only checking once a week. I'm just suspicious that this drop is a little contrived, immediately to start the year and pushing up steadily to close the year. Anyway, I wasn't expecting this quick opportunity to watch for a good entry for a larger position and for newcomers to the strategy.
Thanks for the interesting article. I have several comments/suggestions so I will start with the trend on the 04AUG chart. You show that QQQ broke that uptrend, which would have been a logical place to sell before it broke support. Once it broke, you can easily see how far it has to go to reach the next trendline. Everyone should be able to decide if it is worth the risk or just use a stop loss if it breaks. It would be helpful if you add another chart showing that lower trendline also broke in late SEP2023. By then a new downtrend had developed which thwarted the rally on 12OCT leading to a lower low, where everyone was sure we were in for a new dot-com crash.
The trendlines you have used are long-term trends allowing you to live your life. While I maintain the execution of this strategy is not quite as simple as the few trades you demonstrated, it can be almost that simple. For instance you might have been using a different trendline and sold instead in late Sept. Or perhaps sold early on 21JUN then had to try to get back in. Knowing to buy in late OCT required using shorter trendlines that would have had you also buying in early OCT, then selling for breakeven. Or worst-case you bought the break of the downtrend on 07NOV. Also, you will need to understand stop-loss orders because sometimes you will buy what appears to be the start of a rally, only to have another 10% drop (30% with TECL).
Either way, careful management of these trendlines has 2 major benefits. First, you can more comfortably use the leveraged ETFs. Second, you can get out early when there are signs of trouble. Holding these leveraged ETFs is extremely dangerous through bear markets. Holding through 2000-2002 dot-com crash or 2008 crash can drop a $10,000 investment down to $40. Then it takes a 25,000% gain just to break even again.
This article was kind of thrown together so my son had something to read after chatting and he was really interested in my ideas. I also wanted to get something out to close the year and the creative juices weren't flowing smoothly. On New Year's day, I went back to the first day for QQQ in March, 1999 and drew lines on the weekly chart in investing.com. One super interesting result was the drop of 83.6% from the 2000 high of 120.00 to the 2002 low of 19.68. By 2004 it was approaching 40 which looks like a tiny slow climb compared to the massive drop, yet the gain was 87.6%! Slightly more than the drop!
I showed that to Dad, then progressed week by week, asking when he would sell. That was really, really interesting. I chose to sell at 40 and he waited for about -3%. I was ready to buy on a move over 41. He then sold at 37 and I bought at 35 with a stop at 34. That left me sitting comfortably and waiting and him struggling as it went back to 37. This happened several times, at other points. It was a super useful exercise for him to make decisions, while seeing the lines (but not future reversal lines) and making decisions. Selling Feb. 2020 before covid was easy as it had popped above the resistance line and back sharply. He now understands that covid was simply an excuse for a pullback that was ready and waiting to happen.
Wit 2020, one could have sold on 24JAN, then back in 03FEB after the higher low was confirmed, or on 04FEB breakout above your sell point on 24JAN. Then you would have sold 21FEB or worst-case 24FEB for breakeven.
I like how we can devise multiple strategies with these principles and both come up with amazing gains, while protecting on the downside.
I spoke with 2 friends today and we looked at trend lines briefly. It was frustrating how they have been brainwashed by media as the conversation quickly went into how politics affects the markets. Something about how he wanted to be out of the market come election time in case so and so won/lost. The other friend got upset that a certain party always claims responsibility for market gains but never losses. Focus! That has nothing to do with this! It's also hard to understand their risk tolerance if there is a string of small losses that add up to -10% in a month, will they quit? I think getting started and getting a buffer of profits maybe 25% in the account is critical. But you can't predict how it will start.
I suggest you pick some odd stocks, like MCD and CAT, and go back in time with them and let them decide when to buy and sell. They likely won't have a bias then. Or, use QQQ but hide the dates to take away the bias. On a weekly view, QQQ broke upper resistance mid-Feb. 2020, then reversed. It was a classic time to sell as it was overextended and due for a drop. On Monday the next week, it gapped lower and fell on covid news. A Sunday review had you ready to sell if you hadn't already.