QQQ Trading Strategy That Beats the Market (Proven Backtest Results)
- FinancialWisdom
- 2 days ago
- 6 min read
Discover a powerful QQQ trading strategy that consistently outperforms the market.
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Video Transcript Below:
This could be one of the most beneficial videos to date for anyone serious about systematic investing in tech stocks. A simple 200-day moving average strategy on QQQ delivered 791% returns versus just 428% for buy-and-hold over a 24-year period from 2000 to 2024 - that's nearly double the performance with only 28.6% maximum drawdown compared to a devastating 83% drawdown for passive investors. Even more remarkable? This strategy kept you in the market for roughly half the time, dramatically reducing your risk exposure.
These aren't theoretical numbers - they're from Leslie Masonson's comprehensive new book "The QQQ & TQQQ ETF Profit Machine," and today we're breaking down the exact strategies that could transform your approach to technology investing.
Before we dive into these powerful strategies, let's establish why this book matters. Leslie Masonson brings over 50 years of market experience to this work - he's authored six financial books, served as ETF columnist and Contributing Writer for Technical Analysis of STOCKS & COMMODITIES magazine since 2016, and worked as a Vice President and Financial Advisor at JP Morgan Chase. Additionally, he has actively traded the TQQQ and E-mini Nasdaq futures for the last fifteen years. This isn't amateur hour - this is decades of institutional knowledge distilled into actionable strategies.
The QQQ tracks the Nasdaq-100 Index, representing the 100 largest non-financial companies on the Nasdaq exchange. This matters because it captures the innovation economy - artificial intelligence, cloud computing, and the technological revolution reshaping our world. Since its inception in March 1999, QQQ has delivered 1,233% returns through February 2025, dramatically outperforming the S&P 500's 377% and the Dow's 359% over the same 26-year period.
The ProShares UltraPro QQQ, known as TQQQ, provides triple leverage to the Nasdaq-100 Index. This means when QQQ rises 1%, TQQQ typically gains 3%. The mathematics of compounding at this level can be extraordinary.
Since its inception in February 2010, TQQQ has delivered returns that seem almost fictional. The book documents how this leveraged ETF has achieved gains exceeding 18,000% during certain periods. However, here is a brutally honest truth from the book: TQQQ can also decline by 50% to 80% during bear markets.
Masonson's book uncovers multiple systematic strategies to trade this technology powerhouse with or without leverage, using simple technical analysis tools available for free on platforms like StockCharts.com and TradingView. No expensive software required - just disciplined execution of proven methodologies.
The key takeaway from Leslie’s systematic approach is this: simple, rule-based strategies have vastly outperformed the so-called “best in the industry” fund — the ARK Innovation ETF. Its CEO, Cathie Wood, boasts of having top-tier analysts capable of spotting trends before they’re obvious. Yet the fund’s track record tells a very different story.
Since its 2014 launch, ARKK is up just 270% — far below the buy-and-hold index’s 467%, and dramatically behind some of the simple strategies Leslie outlines. The drawdowns are even more alarming. In the 2022 decline, ARKK plunged over 80% from its peak, while the NASDAQ-100 fell only 33%. Today, the NASDAQ-100 has recovered 43% from its 2021 peak, but ARKK remains stuck at a 50% drawdown. That’s millions in fees spent to deliver catastrophic results.
Coming back to the book, from a technical analysis standpoint, Masonson dedicates significant attention to what he calls the "Composite Indicator" - a systematic approach using six complementary technical indicators:
First, simple and exponential moving averages, particularly the 20-week, 50-week, and 200-week periods. His backtesting reveals that when QQQ's price remains above these moving averages in proper alignment, the trend is solidly bullish.
Second, the MACD indicator, which identifies momentum shifts and trend changes. Masonson emphasises that the most reliable MACD signals occur far from the zero line, not during the frequent whipsaws near neutral territory.
Third, the Relative Strength Index, adjusted to a 7-period setting rather than the standard 14. His research shows RSI buy signals tend to be more reliable than sell signals across all timeframes.
The remaining three indicators - percentage of Nasdaq-100 stocks above their moving averages, Keltner Channels, and the Nasdaq-100 Bullish Percent Index - provide confirmation and help avoid false signals.
The genius of this approach lies in the weight-of-evidence methodology. Masonson advocates taking action only when at least three of the six indicators align in the same direction. This dramatically improves the probability of successful trades.
In strategy chapters, Masonson presents thoroughly backtested approaches spanning decades of market data. There's something for everyone here - whether you're a conservative investor seeking steady growth or an aggressive trader comfortable with leveraged positions.
Let me walk you through three powerful strategies from the book, starting with the simplest and most elegant approach: The 225-Day Moving Average System
This couldn't be more straightforward. When QQQ's price crosses above its 225-day moving average, you buy. When it crosses below, you sell and move to cash. That's it.
The results over 25 years from January 2000 to February 2025? This simple system delivered 1,061% returns versus 628% for buy-and-hold. More importantly, maximum drawdown was just 28.6% compared to 83% for passive investors. You achieved superior returns while cutting your worst-case losses by two-thirds.
For TQQQ - the triple-leveraged version - this same strategy did not fare as well. Over the 14-year period from 2011 to 2025, it produced 4,067% returns with a 69.9% maximum drawdown, compared to buy-and-hold's 10,806% return but devastating 81.7% drawdown. The strategy gave you 38% of buy-and-hold's return while reducing maximum loss by 12 percentage points, which is not much on a risk-adjusted basis.
Strategy Two: The Seasonal Switching System
This strategy exploits the market's seasonal patterns, specifically the "Best Eight Months" phenomenon that Masonson adapts for the Nasdaq. You hold positions from November through June, then move to cash during the historically weaker July through October period. But here's the sophisticated twist - entry and exit signals are refined using MACD crossovers rather than fixed calendar dates.
The results over 52 years from 1971 to 2023 are decent, given the miniscule time and resource commitment in the approach. A $10,000 investment following this seasonal approach would have grown to $3,525,695 - that's an annual return of 13.1% with 45 winning years against just 8 losing years. The winning percentage? An impressive 84.9%.
Compare this to the weak months strategy over the same 52-year period, which produced essentially flat returns with multiple losing years. The seasonal edge is real, quantifiable, and exploitable through systematic execution.
Strategy Three: The Relative Strength Rotation
This strategy continuously rotates between TQQQ and TLT (20+ Year Treasury Bonds) based on three-month relative strength rankings. Each month, you hold whichever asset shows superior performance over the previous 90 days.
From December 2009 through March 2025 - a 15-year period - this approach delivered 7,471% returns compared to 1,142% for QQQ buy-and-hold. The compound annual growth rate reached 33.1% - nearly double QQQ's 18.1% return over the same timeframe. The maximum drawdown was higher at 56.3% vs the buy-and-hold’s 35.1%, but the strategy still outperforms massively on a risk adjusted basis.
What separates Masonson's work from typical trading books is the relentless focus on risk management and systematic execution. Every strategy includes specific entry rules, exit criteria, position sizing guidelines, and maximum drawdown parameters. This isn't gambling - it's engineering superior risk-adjusted returns through disciplined methodology.
The book emphasizes that successful investing isn't about predicting the future - it's about following proven systems that have worked across multiple market cycles. When you remove emotion and rely on quantified rules, you position yourself to capture the long-term wealth creation of technological innovation while protecting against devastating losses.
"The QQQ & TQQQ ETF Profit Machine" is essential reading for anyone serious about systematic investing in the innovation economy. Masonson has created a comprehensive blueprint that transforms complex market dynamics into actionable, rule-based strategies. He also provides a comprehensive chapter on stock market essentials including myths that should be avoided, as well as chapter on QQQ-based relatives like QQQM.
The evidence is clear: systematic, rule-based strategies consistently outperform buy-and-hold by wide margins, all while significantly reducing risk. Their edge is even greater when compared to high-profile tech funds like ARKK. Instead of paying thousands in fees to underperform the index, investors would do far better learning from the principles in this book.
The future belongs to those who can systematically capture the returns of innovation while managing the inevitable volatility. This book shows you exactly how to do both.
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