The Best QQQ Strategy That I Tested in 2020 and 2021 - YouTube

I often get asked what is the best QQQ/Nasdaq  100 strategy that i have tested - well in this  

video i'm going to look at the three best trading  strategies that i have tested in 2020 and 2021  

I'm Mark from Tradinformed.com and if you like  this video please don't forget to hit the like  

button and subscribe to this channel if you  want more content like this about analyzing  

and back testing the financial markets i  have tested literally hundreds of different  

trading strategies and the qqq has been one  of the best performing markets not just in  

terms of the overall return although this has  been very good but in terms of the smoothness  

of the price action and what this means  is that it is easier for mechanical and  

discretionary traders to trade, we get less false  signals which means we get more winning trades  

in this video i am going to cover how I compared  the strategies including the metrics that i think  

are the most important i'm going to cover each  strategy and show you exactly how to trade them  

i'm going to show you how i tested each strategy  the results that i got and also my thoughts about  

each strategy so stay tuned so how have i compared  these strategies and why have i chosen these  

three, well there's loads of great metrics out  there but i have chosen three for this analysis  

number one the MAR ratio the MAR ratio is compound  annual growth rate divided by maximum drawdown  

so as a single metric to compare strategies it  is very powerful compound annual growth rate  

includes our overall net profit as a function  of time and maximum drawdown shows how much pain  

we have felt in following this trading strategy  number two the win-loss ratio this may seem like  

a very simple way to compare strategies but  it is absolutely crucial for our psychology  

in terms of implementing the strategy you can  get a strategy with 95 winning trades that you  

cannot follow because the drawdowns for those 5  of losing trades are too high equally a strategy  

with only 20 winning trades can be easy to follow  if you're comfortable holding on to your winning  

trades - it's all about how your psychology  works and number three average trade expectancy  

now this is a way to measure how much profit we  can get in terms of the underlying market per  

trade so this makes a difference because cost of  trading is a factor that many of us don't consider  

so the higher average trade expectancy is the  lower our cost of trading per trade will be  

let's have a look at the three trading strategies  strategy number one is the renko strategy renko is  

a japanese charting system that uses price  instead of time to calculate the bars now  

i am using it as a filter the strategy is very  simple trade in the direction of the renko bricks  

and enter on a daily retracement strategy number  two is the stochastic strategy now this uses the  

stochastic oscillator as the entry signal we enter  when the stochastic oscillator crosses above the  

entry level now i'm using two entry levels in  this strategy and i will show you what they are  

later there is a supplementary filter to  this strategy and that is only enter when  

the ratio of the closing price divided by the ATR  is lower than three percent and the logic for this  

is that we only trading long trades so we only  want to enter when volatility is relatively  

low the third strategy is the two ema strategies  and this is to enter when the price crosses above  

the three period ema and it is also above the 13  period ema next i am going to look at how i tested  

the strategies and the results that i got on the  screen is aTradinformed backtest model it is built  

in excel and this particular model was created  for Tradinformed members so i'm going to briefly  

show you what you can do with this model firstly i  have each of the three strategies i have the renko  

i have the stochastic and i have the two  ema strategies so you can switch between  

the different strategies just using the check  box here you can test different profit targets  

you can use different ways and see how the results  change in real time you can test different markets  

i'm testing on the QQQ but you can very easily  test this on the spy the TQQQ or any market  

that you wish we've got different exit conditions  and over here in real time we have the strategy  

results so if you want more information about  how to use Tradinformed backtest models there  

is a link on the screen and below this video  so please check that out for more information  

let's have a look at the individual strategies  firstly renko you can see for each strategy  

i have programmed in some different variables so  for renko the key one is the bar or brick size  

so i've set this to 20 we can easily  change this to test different values

and you can see again the results adjusting  in real-time so I'm going to set this back  

to 20 per cent now we can also adjust the profit  target so I'm using a fairly tight profit target  

of just six per cent stop loss of two per cent  and a trailing stop a chandelier style trailing  

stop of three per cent I'm also using some exit  conditions now these are excellent conditions  

that I've worked on over time and I really like  so we've got two different exit conditions you  

can see them in a lot of my models and strategies  firstly I'm using them for all three strategies  

close after a number of bars if the trade is in  profit so we're going to give the trade a decent  

a number of bars and if it's in profit and we  haven't and it hasn't hit our targets then we're  

going to exit it so it's a type of inactivity stop  secondly we're using what I call a strength close  

but the difference is for this one we're  using it for only when the trade is in loss

so all that means is two consecutive bars of  at least this gain close to close we will exit  

the trade and I'll explain more about that  in a moment so we have Renko if i check this  

box here we can have a look at stochastic  now the stochastic was probably the most  

versatile in terms of working  for a number of different

settings and setups you can see we're getting  pretty good results in terms of the MAR  

ratio down here in terms of net profit percentage  winning trades for all of these different setups  

so I found a very tight trading stop working  well which shows you that the entry conditions  

are quite sharp so we were able to use  a tight trailing stop and stop-loss

so finally let's have a look at the  stochastic look back period I'm using  

five bars it's not essential to use five  but a shorter period tended to work better  

although a longer period will also give decent  results so I'm going to keep it at five there my  

stochastic entry levels I told you I'm using  two different levels now you don't have to  

you could just set one of these to zero  and we're only testing one, in fact,  

that's a good way to check the range of values  but I've found two giving a better set of results

now the EMA strategy i've used  a different reward to risk  

profile for my two ema  strategy I'm using this time

a profit target of three and a stop loss  

of 100 and all this effectively means  is that that stop loss is not active  

so only the profit target is active here  however we have these other exit conditions

so we haven't got very many  

variables for this strategy we've only got  two so we've got a 3 and a 13-period EMA

just sticking to the Fibonacci numbers you can  see we're going to get different profiles you see  

if we keep ema two longer it's going to act as  more of a filter if i push that out to 35 we're  

getting a lower net profit but still decent MAR  ratio so the strategy is working successfully for  

a range of values again now the exit conditions  are more significant here because we're not using  

a traditional stop loss so we only want the trade  to go on for a short while if it is in profit and  

we want the trade to exit any time we have a  little bump up and even if we're in loss or rather  

when we're in loss a couple of days that's showing  a reasonable daily gain then we're going to exit  

that trade on the screen i have the combined  results of each of the three strategies you can  

see that renko and stochastic are returning  very similar results and the EMA strategy  

is returning a different profile of results we've  got a much higher percentage of winning trades  

and we've still got a good MAR ratio and a higher  average trade expectancy i said at the start  

of this video i was going to give my thoughts on  each of these three strategies because the numbers  

never tells the full story firstly renko it is  easy to follow if like most people you have a  

job and other commitments this is as easy as  it gets all you need to be looking for is a  

close lower than the previous close and then you  enter the trade this system relies on renko bars  

now these are a price based system and they  are different but now difficult for most of us  

who are used to candlesticks standard weekly  daily five minute bars to get used to so you  

need to be aware that this is a price based bar  system and it is more difficult to conceptualize  

the stochastic strategy this is probably  the most versatile of the three strategy  

it works well with a wide range of settings and  i like that it makes it feel a lot more robust  

however this strategy is in the market a lot so  

if and when we get a downturn this  strategy will get us into that downturn  

the two ema strategies firstly number one the  great win loss ratio this is fantastic for people  

who like a lot of winning trades and most of us  do but because we have no stop loss this strategy  

you're going to spend time with trades that are  underwater that are losing and you have to be  

patient at those times because the strategy has  systems to get out when the market bounces back  

also for the two ema strategy there's not as  many trades as the other strategies now this  

can be a good thing or a bad thing depending on  your perspective it can be a good thing if you  

like to be patient wait for the best setup and  if you're impatient quite clearly this could be  

a negative because you're going to want more  action trade a strategy that is appropriate  

for you i hope you enjoyed this video  as much as i enjoyed doing the analysis  

if you want more information about trading  the financial markets about trading strategies  

about analyzing and backtesting trading  strategies please go to Tradinformed.com