Leveraged Momentum is an investing system designed to beat the market long term and to avoid sitting idly by while portfolios lose half their value or more during bear markets.
I’m Pete Nikolai, and I developed the four strategies in the Leveraged Momentum investing system and the Optimum Mix of those four strategies. The backtest for each strategy shows substantially better performance than the market for the period since 2002.
Since April 27, 2016, I have been providing the data on each of the trades placed for two of the Leveraged Momentum strategies (Leveraged Trends or LevTrends and Leveraged Bands or LevBands) to a third party site, TimerTrac.com, so actual performance can be verified.
By clicking the Timer Tracked icon above you will be taken to the site where you can graph the performance of those strategies against a comparative index of your choice. In addition to graphing their performance, you can also view various statistics and the historical trades for the strategies.
The free Leveraged Momentum Update newsletter is compiled and emailed every sixth day the U.S. stock markets are open which is when the appropriate trades would be placed to align an investor’s portfolio or portfolio segment with the Optimum Mix. The newsletter lists the actions taken and provides performance data for each of the Leveraged Momentum strategies including the two that can be verified using TimerTrac. The Leveraged Momentum Update newsletter was originally created for friends and family who requested a simple yet aggressive system for investing, and it is offered as a free service at this time. You can subscribe by clicking this link and providing your information. After subscribing, you can unsubscribe at any time by clicking the appropriate link at the bottom of each issue of the newsletter.
I suggest that interested investors subscribe to the free newsletter and review several issues to get a feel for the information provided and the trades that may be required. After reviewing a few issues, please feel free to contact me with any questions or comments.
While the formulas used in each of the Leveraged Momentum strategies are proprietary, the actions recently taken for all four strategies and the current Optimum Mix are listed on each issue of the free newsletter. The FANGA Momentum and Leveraged Index strategies and the Optimum Mix require evaluation (and any indicated trading) every sixth trading day (the day the newsletter is sent). Leveraged Trends and Leveraged Bands require evaluation (and any indicated trading) every trading day if implemented outside the Optimum Mix. However trades are rarely indicated more than 3-4 times per month for any of the strategies. If you would like to receive a simple email notification each time a trade is executed for the Leveraged Trends and Leveraged Bands strategies then please contact me and I will add you to the distribution list for those emails (separate from the distribution list for the newsletter).
Please keep in mind that the first leveraged ETFs were launched in 2006 and most of the leveraged ETFs used in these strategies were launched in 2009 so the price data for backtesting a strategy prior to an ETF’s launch date was extrapolated using historical data for the index on which the ETF is based or for another ETF based on the same index.
Following is a summary of each of the strategies to provide some perspective on the tactics used in the Leveraged Momentum investing system:
Leveraged Bands (LevBands)
- buy UPRO on any day after the day when the price fell below the lower band if the price either opens above or rises back up to the lower band (must be at least second day after selling)
- starting the day after buying: if UPRO opens above the upper band or below the level at which a trailing stop loss order would have been triggered then sell; otherwise schedule a Conditional One-Cancels-the-Other (OCO) order consisting of a limit order to sell if the price rises to the upper band and a stop loss order to sell if the price falls to the price that is the specified percentage below the High since it was bought
- when UPRO is sold then consider buying it again on the second day after selling
Leveraged Trends (LevTrends) is a complicated strategy that strives to be invested in UPRO if the market is trending up, in cash if the market is correcting, and in SPXU if the market is trending down during a bear market.
The FANGA Momentum (FANGAMo) strategy uses a different quartile every sixth trading day, compares the returns of the infamous FAANG stocks (FB, AMZN, AAPL, NFLX, and GOOG), and buys the one that has performed the best even if the return is negative (after selling that quartile’s previous best performer as of 24 trading days earlier if a change is indicated). By using a different quartile every six days, wash sales are reduced and good faith violations are avoided.
Leveraged Index (LevIndex) is similar to the FANGA Momentum strategy in that it uses a different quartile every sixth trading day, but it compares the returns of Leveraged Index ETFs (UPRO, TQQQ, URTY, RETL, EURL, and TMF), and buys the one that has performed the best even if the return is negative (after selling that quartile’s previous best performer as of 24 trading days earlier if a change is indicated).
The Optimum Mix combines the FANGA Momentum, Leveraged Trends, Leveraged Bands, and Leveraged Index strategies and is determined by calculating the percentage of the overall balance that should be in cash and in each ETF or stock based on the recent performance of those strategies relative to each other, the current positions indicated by each strategy, and the current overall performance of the strategies.
Perhaps the easiest way to implement the Leveraged Momentum system for portfolios greater than $5,000 is to use the Optimum Mix percentages listed on the newsletter to calculate how much to have invested in each asset until the next issue of the newsletter is received six trading days later. To align a portfolio or portfolio segment with the current Optimum Mix an investor would multiply the total balance to be invested using the Optimum Mix by the percentages listed for each asset to calculate the approximate amount to be invested in each asset. Then the investor would sell and buy as needed so their position in each asset is close to the calculated amount.
While the Optimum Mix may underperform one or more of the individual strategies during some periods, it tends to be more diversified than the individual strategies, tends to outperform during bear markets, and tends to provide more consistent performance over longer periods that include bear markets.
Disclosure and Disclaimer:
Return percentages and projected balances do not include dividends, commissions, fees, or other costs.
Transaction charges, management fees, taxes, and other costs will impact results.
Performance will vary based on the timing and details of trades.
For a description of the risk considerations for each Fund, please refer to each Fund’s prospectus, which should be read carefully before you invest.
References to “cash” usually refer to the money currently held in a sweep account. Proceeds from the sale of a stock or ETF are usually swept into an interest bearing account of some type such as a money market fund that is invested in low-risk, low-return assets such as Treasury Bills and other short-term interest bearing notes.
Markets and investments such as stocks and ETFs are unpredictable and volatile. To reduce downside risk, prices should be monitored and assets exchanged for other assets that are more likely to increase in the near term, and/or trailing stop loss orders should be used to automatically sell if the price declines more than an acceptable amount. Trailing stop loss orders set at a low percentage will trigger frequently due to normal volatility and result in frequent losses that eliminate any possibility of long-term gain.
You can lose money by investing in any fund or stock. Any investment strategy should be one part of a comprehensive investment program. All investments are subject to market risk, including possible loss of principal.
Investors in exchange-traded products such as ETFs will bear risks including but not limited to, risks associated with smaller companies, foreign securities, emerging markets, debt securities, commodities, and derivatives. In addition, investors in exchange-traded products are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of ETF shares may be higher or lower than the value of its underlying assets, there may be a lack of liquidity in the shares of the exchange-traded product, or trading may be halted by the exchange on which they trade.
Principal risks of investing in foreign securities include changes in currency rates, foreign taxation and differences in auditing and other financial standards. Debt securities may be subject to credit risk and interest rate risk. Investments in debt securities typically decrease in value when interest rates rise.
Many advisors would suggest more diversification, but adding additional assets can water down a portfolio’s performance rather than increasing long-term returns. Over-diversification tends to create a false sense of security. Is it really safer to keep your money under your mattress or invest in a variety of assets when doing so prevents you from having millions of dollars more in your account in the years to come? I prefer to keep things simple by only investing in those assets that seem most likely to increase substantially in the near future.
I believe that Leveraged Momentum is providing the best return that I can achieve without spending considerably more time for little additional benefit. I prefer to spend that time doing other things that provide more satisfaction and fulfillment.
ETFs are relatively new. Data for backtesting a strategy prior to an ETF’s launch date was extrapolated using historical data for the index on which the ETF is based or for another ETF based on the same index.
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are not managed, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.
Because the strategies rely heavily on third party quantitative models, they are subject to model and data risk. Certain returns shown may reflect back-tested performance. All performance presented prior to index or fund inception date is back-tested performance. Back-tested performance is not actual performance but is hypothetical. Back-tested data may be impacted by the benefit of hindsight. It is important to remember that backtesting produces hypothetical results based on historical data and extrapolations rather than actual transactions.
Charts and graphs are provided for illustrative purposes only. Index returns do not represent the results of the actual trading of investable assets.
Opinions and statements of market trends that are based on current market conditions constitute my personal judgment and are subject to change without notice. The views described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Past performance does not guarantee future results.
Launch Momentum, Leveraged Momentum, FANGA Momentum, Leveraged Trends, Leveraged Bands, Leveraged Index, Optimum Mix, and every other investment strategy that beats the market during some periods will lose money during some other periods.
Investing involves risk, and each investor is responsible for determining whether each investment is suitable based on their personal financial situation and objectives. I am not an investment advisor, accountant, or attorney. No part of this email message should be interpreted as investment, accounting, tax, or legal advice. Each investor should consult with an investment, tax, or legal professional regarding investments and their personal financial situation.
This website and the Leveraged Momentum newsletter are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that the publisher and author is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.