Strategy: Short Trade in QQQ #1

Trades generated by this strategy are available to paid subscribers

Short Trade in QQQ is a short-only, rule-based swing trading strategy that can be used as a hedge or a diversifier for a long-only portfolio. This strategy tries to capitalize on sharp market selloffs during risk-off periods.

It can be traded on NASDAQ 100 index ETFs like QQQ, QLD, TQQQ, index options or NQ_F, MNQ_F futures.

This strategy triggers near the market close and typically holds a position for eight days. Since serious risk-off events are relatively rare, this strategy may not trade for prolonged periods of time. This is by design. We try short selling only when we feel there's an edge in this trade.

This is a complex strategy based on the following concepts:

• Our propertiary RiskMaster model as a fundamental factor

• Mean-reversion in a down trend

• Seasonal patterns of the US stock market

Thanks to including our RiskMaster model stance into the trade rules, this strategy will trade only in periods when, we believe, there is an increased fundamental probability of a risk-off event occurring.

This is a well-thought-out approach that will never try to time a market top; it will only trigger if both fundamental and technical factors are met and only after observing actual weakness on the tape.

While in trade, this strategy can trigger another short sale to add (scale in) to the trade to improve the average sale price. Therefore, keep in mind that the starting position should be 50% of the position sizes used in other strategies. The scale-in trade can trigger only once during the trade, and it may or may not occur, depending on market conditions.

The P&L chart of this strategy looks as follows (QQQ, no leverage, $100K account):

Strategy statistics:

• Net Profit: 127.75%

• Max Drawdown: 12.81%

• Total Closed Trades: 48

• Percent profitable: 72.92%

• Profit factor: 3.577

Please keep in mind that due to their nature, short-selling of the stock market indices is a challenging and risky endeavor, even for seasoned market professionals. Risk-off phases tend to be volatile, chaotic, and unforgiving to poorly timed trades. Vicious oversold rallies can spark at any time and tend to last longer than most short-sellers can tolerate. Due to the above, TradeMachine authors prefer to size such trades relatively small and opt to use options.

TradeMachine subscribers receive email alerts with position updates each time this strategy enters or exits a trade. Some strategies include take-profit and stop-loss price levels.

Past performance is not indicative of future results. Results based on simulated or hypothetical performance have certain inherent limitations. All posts are subject to the disclaimer on the About page.