I’ve developed a day trading system for TQQQ which yields what I believe are good and consistent results. The problem with trading the stock is that it’s around $150 a share and my capital is low. I don’t know a lot about options but I understand that they can yield good profit with less capital investment (I’m aware that the risk is greater too). Take a look at the stats from a sample of ten trading days, and assuming these results are consistent and considering the win/loss ratio of the system and the profit per winning trade compared to the loss of the losing trades, how would you trade this if you had low capital but wanted the biggest possible return without an extraordinary risk? Some type of options trading? Please be as specific as possible so I have a good basis to start my research into the recommendations. Thanks! Average loss per trade - $0.50 ($0.25 - $0.75) 11/5 9 wins 7 losses Winners 4 .50 1.5 .50 .50 2.5 2 3 3 ______________________________________________________ 11/6 8 wins 6 losses Winners 3 1 3 1 2 1 .50 2 _____________________________________________________ 11/9 6 wins 8 losses Winners 3 .50 3 1 1 1 ______________________________________________________ 11/10 9 wins 4 losses Winners 1 2.50 5 1.50 3 .50 1 2 1 ______________________________________________________ 11/11 9 wins 5 losses Winners 3 .50 1 2 .50 1 2 2 2.5 ______________________________________________________ 11/12 10 wins 9 losses Winners 1 .50 1 1 .50 1 .50 2 1 1 ______________________________________________________ 11/13 7 wins 3 losses Winners .50 .50 1.50 1 .50 1.50 1.50 ______________________________________________________ 11/16 5 wins 4 losses Winners 2 1 .50 1 1 ____________________________________________________ 11/17 6 wins 8 losses Winners .50 3 1 1 1 1 ______________________________________________________ 11/18 5 wins 5 losses Winners .50 2 1.50 .50 1
a winning system with a sample size of 7, when the market is going up uncontrollably, is not sufficient amount of data. if the market conditions change the system can blow up in your face. with options you are going to pay commissions and the bid/ask spread on both the sell and the buy, which for example is .015 on each end, so you need to make .03 just to break even. (assuming a 1 cent spread and .50 commission)
The sample size is much greater than what I shared, but it's a good representation. I don't need an analysis on how to backtest, I'm just looking for your opinion on how you would trade this system with low capital to make decent returns. I'm aware of what happens when markets change.
Open a futures account at https://www.ampfutures.com/ Test your system in simulation mode on MNQ (Nasdaq e-Micro) using one of the free platforms AMP provides (many can be automated) That's the cheapest option you will find. Did I mention do all of this in simulation mode?
Trading any derivative of TQQQ is going to increase your costs and risks. If you feel you are confident with TQQQ, then trade it directly. If you can't afford it, well, you can't afford it. Keep forward testing and saving money.
Daytrading TQQQ is daytrading the NASDAQ 100 Index. The only sensible and cost effective way to daytrading the NASDAQ 100 Index is NQ futures. Futures brokers such as AMP have $1000 day trading margins for NQ futures. You don't have to use minimum margin and can put up $2,000 or more a contract to limit your risk. Futures also give you favorable 60/40 tax treatment on your profits. If your system falls apart then trading 14 times a day will run up losses real fast.
The advise on using futures seems on point. The TQQQ option liquidity is not optimal and expect you may encounter excessive friction loss day trading it with options.
Few Notes: It would be helpful to see the actual losses and not an average. What is your largest loss? The mode? Isn't the TQQQ smallest tick size .01? Why are the win amounts not in those increments? TQQQ is supposed to be 3x NQ during the day. Does that edge (extra volatility) impact your system? E.g. does it work with NQ? What is the commission impact? One might be able to make this work in TQQQ but it might not work on NQ where the tick size is much larger and the volatility (not 3x) is not there. Without knowing more, I would guess the win size compared to the loss size is not large enough to indicate a system that gets the larger portion size of the swings. If that is the case, when you get to 1X NQ, the system will get chopped up and turn into mush, especially with the W/L ratio you reported. But just guessing. Now if you can get a better W/L ration and a larger Win size to loss size it might. Bottom line Vince, good work, however not all instruments work out for non system related reasons. I.e. the system might work but the instruments might not. So you get into a situation where you have to know the instrument you are targeting, make sure all the pieces are there for the tactics, THEN develop the system in that environment. Developing a system that works in an unusable environment, does not work out, as you said. But good effort! If it works in TQQQ just use it when you have enough funds. What happens when it is 2X QQQ will tell you something too.