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Just wondering if anyone is trading any of the 2 or 3 times leveraged ETFs? TQQQ based on the NASDAQ seems pretty popular.
Leveraged ETFs
- Thread starter karenjones
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I swing trade and occasionally day trade the leveraged ETFs, TQQQ, TNA. I keep an eye for swing trade setups across small list of ETFs that cover most sectors of the market. The fact that some are leveraged isn't significant as I risk a fixed amount (1%) of my account on each trade. TQQQ is very popular because it's very liquid (small spreads) and has nice daily ranges. Occasionally my broker doesn't allow me to short TQQQ and if I want to swing trade it short I'll look at the inverse ETF - SQQQ.
Please ask if you've other questions.
Please ask if you've other questions.
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What about BITCOIN?
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Thanks for that info Peter. I'd never really considered trading ETFs previously. I noticed that the leveraged ones ones seem pretty "gappy" and obviously more volatile. I was reading somewhere that a good strategy for TQQQ is the buy and hold along with DCA due to the long term upwards bias. Although in saying that, the 2022 highs are still yet to be taken out, whereas the QQQ has performed way better.
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If you intend to buy an ETF as a longer term hold then the day to day volatility (gap opens) shouldn't matter.
If you're not confident about timing your purchases then regular periodic purchases are best.
The difference in performance between QQQ and TQQQ that is noticeable over time (years) is due to an inherent inefficiency of the leveraged ETF pricing to accurately match the daily market movements. It's only a tiny inefficiency but noticeable over time. Let me try to explain. If the QQQ falls 10% then it must gain 11% to get back to where it was. The leveraged TQQQ falls 20% and requires 25% to get back to where it was. 25% is more than double the 11% gain that the unleveraged ETF requires. The leveraged ETF has a harder task to catch up. Over time it can't.
If you intend to hold for years then I'd recommend an unleveraged ETF like the QQQ. If you can time your purchases and take advantages of market dips then trade TQQQ as it appreciates much more in percentage terms. If you can't time it then watch out, as TQQQ falls twice as much as the QQQ.
If you're not confident about timing your purchases then regular periodic purchases are best.
The difference in performance between QQQ and TQQQ that is noticeable over time (years) is due to an inherent inefficiency of the leveraged ETF pricing to accurately match the daily market movements. It's only a tiny inefficiency but noticeable over time. Let me try to explain. If the QQQ falls 10% then it must gain 11% to get back to where it was. The leveraged TQQQ falls 20% and requires 25% to get back to where it was. 25% is more than double the 11% gain that the unleveraged ETF requires. The leveraged ETF has a harder task to catch up. Over time it can't.
If you intend to hold for years then I'd recommend an unleveraged ETF like the QQQ. If you can time your purchases and take advantages of market dips then trade TQQQ as it appreciates much more in percentage terms. If you can't time it then watch out, as TQQQ falls twice as much as the QQQ.
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Good explanation Peter, thanks. Also I believe that the fees are higher. So I imagine that would add to the price drift. Here's a comparison chart that really emphasises the point yo make about the ability to time the trades.
I currently have a small holding of TQQQ, but I don't think I'll be holding them long term. I don't think I'll be doing the DCA strategy either.
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