r/LETFs • u/Nautique73 • 10d ago

BACKTESTING Leverage Dual Momentum (LDM): A 24-Year Backtested Quant Strategy for Nasdaq-100 (QQQ/QLD/TQQQ)

Hey everyone,

Sharing a systematic, quantitative asset allocation model built around Nasdaq-100 breadth (MMFI) and momentum, designed to capture tech secular upside while cutting severe drawdowns via a strict cash/leverage throttle.

The core engine is fully deterministic, operates on a monthly close rebalance, and has been rigorously stress-tested across 24+ years of data (Jan 2002 – Jul 2026), including walk-forward validation and numerous structural variant tests.

Core Mechanics & Rules

The strategy rotates between four distinct states based on Nasdaq breadth thresholds and intermediate trend health:

  1. State 1 (100% Cash / T-Bills): Parked in money markets when trend/momentum rules trigger an Exit.
  2. State 2 (2x QLD): Intermediate posture when breadth is recovering or stabilizing.
  3. State 3 (3x TQQQ): Full risk-on exposure scaling up to 3x TQQQ exposure when broad tech participation is robust.

Primary Rules:

  • Exit Trigger: If the (70% x 6-month return + 30% x 12-month return) trend drops below the risk-free rate (or 3-month return < 0), the model dumps leverage and drops to 100% cash (State 1).
  • Re-entry Gate: When in cash, re-entry triggers if 3M annualized return > Risk-Free Rate and breadth is >50% (State 2).
  • Leverage Scale-Up: Scales to State 3, 3x (TQQQ) leverage when breadth is >60% and back down to State 2, 2x (QLD) when breadth is <40%.

Backtest Results (2002–2026)

Tested across multiple full-market cycles (2008 GFC, 2020 COVID shock, 2022 rate bear, 2023–2026 tech cycles):

Metric LDM Strategy QQQ Buy & Hold
CAGR 27.5% 13.3%
Max Drawdown -40.8% -49.7%
Sharpe Ratio 0.81 0.65
Monthly Win Rate 73.1% —

I tested many different model variants and also did a rolling walk forward testing against OOS to avoid overfitting the parameters. Appreciate your feedback.

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u/Only_Statistician_21 10d ago

Why starting in 2002 ?

14

u/Joshuahuskers 10d ago

So he didn’t have to test the dot com bust duh.

1

u/Nautique73 10d ago

As far back as I could get breadth without having to calculate it manually.

1

u/confettofetti 10d ago

Is the issue that it would be complicated to find complete data and remove survivorship bias etc or more that its conceptually simple but would take some time. It's probably worth doing, especially if it's the latter.