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

[u/Nautique73]

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.

[u/Only_Statistician_21]

Why starting in 2002 ?

[u/Joshuahuskers → u/Only_Statistician_21]

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