Long-Only Rotation Strategy User Guide
Introduction
The Long-Only Rotation Strategy is designed to help investors participate in the U.S. stock market while reducing risk during unfavorable market conditions.
Instead of trying to predict every market move, the strategy automatically rotates your investment among three positions:
TQQQ – for strong technology market trends
TNA – for strong small-cap market trends
CASH – when market conditions become unfavorable
The goal is simple:
Stay invested when the probability of gains is high, and move to cash when the probability of losses is high.
Unlike traditional buy-and-hold investing, the strategy is not always invested in the market.
What is an ETF?
An ETF (Exchange Traded Fund) is a collection of many stocks packaged into a single investment.
Instead of buying hundreds of individual companies, you buy one ETF that already owns them.
Think of it like buying:
One apple = one company
A basket of fruit = an ETF
This makes investing much simpler.
The Three Positions
1. TQQQ
TQQQ is a 3× leveraged ETF based on the Nasdaq-100 Index.
The Nasdaq includes many of the world’s largest technology companies, such as:
Apple
Microsoft
NVIDIA
Amazon
Meta
TQQQ attempts to deliver approximately three times the daily movement of the Nasdaq.
For example:
If Nasdaq rises 2%
TQQQ may rise about 6%.
If Nasdaq falls 2%
TQQQ may lose about 6%.
TQQQ offers high growth potential but also carries higher risk.
2. TNA
TNA is another 3× leveraged ETF, but it tracks the Russell 2000 Index, which consists primarily of smaller U.S. companies.
Small-cap stocks often outperform during certain economic environments.
When the model detects stronger momentum in small-cap stocks, it rotates into TNA.
3. CASH
Sometimes the safest investment is no investment.
When market conditions become weak or uncertain, the strategy moves entirely into CASH.
Holding cash means:
No exposure to market declines
Preserving capital
Waiting patiently for the next opportunity
Avoiding large losses is one of the key reasons the strategy has historically achieved much smaller drawdowns than simply holding leveraged ETFs.
What Does “Rotation” Mean?
Imagine three parking spaces:
🚗 TQQQ
🚙 TNA
🅿 CASH
Your money is always parked in only one of these three positions.
The model continuously analyzes market conditions and determines which position currently offers the best balance between return potential and risk.
Whenever market conditions change, the strategy rotates into the most favorable position.
Understanding the Current Position
The website displays the model’s current recommendation.
Example:
Current Position
Position: CASH
This means:
Sell TQQQ if you own it.
Sell TNA if you own it.
Hold cash until a new signal appears.
Another example:
Current Position
Position: TQQQ
This means:
Buy TQQQ.
Do not own TNA.
Do not remain in cash.
Or:
Position: TNA
This means:
Buy TNA.
Sell TQQQ if you currently own it.
What Should I Do When the Position Changes?
Simply follow the new position.
CASH → TQQQ
Buy TQQQ.
TQQQ → CASH
Sell TQQQ.
Hold cash.
CASH → TNA
Buy TNA.
TNA → CASH
Sell TNA.
Hold cash.
TQQQ → TNA
Sell TQQQ.
Buy TNA.
TNA → TQQQ
Sell TNA.
Buy TQQQ.
How Often Should I Check?
This is a daily strategy.
You only need to check once after the U.S. stock market closes.
If the position has not changed, simply continue holding your current investment.
No action is required until a new rotation signal appears.
Why Doesn’t the Strategy Stay Invested All the Time?
Many investors believe they should always remain invested.
However, history shows that some of the largest portfolio losses occur during prolonged bear markets.
This strategy asks one question every day:
Which of these three positions currently offers the highest probability of success with acceptable risk?
Sometimes the answer is:
TQQQ
Sometimes:
TNA
Sometimes:
CASH
Protecting capital during difficult periods is just as important as capturing gains during strong markets.
Example
Suppose you start with $10,000.
January
Signal:
TQQQ
Buy TQQQ.
March
Signal changes:
CASH
Sell TQQQ.
Hold cash.
April
Signal changes:
TNA
Buy TNA.
June
Signal changes:
TQQQ
Sell TNA.
Buy TQQQ.
Simply continue following each new signal as it appears.
Understanding Performance Metrics
Performance metrics help answer three important questions:
How much money did the strategy make?
How much risk did it take?
Was the return worth the risk?
Annualized Return
Definition
The average percentage your investment grows each year.
Example:
A strategy with a 20% annualized return means your investment grew, on average, by approximately 20% per year.
Higher is better.
Annualized Volatility
Definition
Measures how much the investment’s value fluctuates over time.
Higher volatility means larger price swings.
Lower volatility means a smoother investment experience.
Lower is generally better.
Sharpe Ratio
Definition
Measures how much return the strategy earns for each unit of risk.
A higher Sharpe Ratio indicates better risk-adjusted performance.
General guidelines:
Sharpe RatioInterpretationBelow 1Average1–2Good2–3ExcellentAbove 3Exceptional (and should be carefully validated)
Higher is better.
Maximum Drawdown
Definition
The largest percentage decline from a previous peak before recovering.
Example:
Your investment grows to $20,000.
Later it falls to $15,000.
The maximum drawdown is 25%.
Smaller drawdowns are generally easier for investors to tolerate.
Smaller is better.
Total Return
Definition
The total percentage gain achieved during the entire backtest period.
Unlike Annualized Return, this does not account for how many years the investment was held.
Higher is better.
Calmar Ratio
Definition
Measures how much annual return the strategy generated relative to its worst historical loss.
A higher Calmar Ratio indicates a better balance between return and downside risk.
Higher is better.
Backtest Performance
The strategy was tested using historical market data from May 2019 through July 2026.
StrategyAnnualized ReturnMax DrawdownRotation Strategy136.9%-19.7%Buy & Hold TQQQ40.8%-79.2%Buy & Hold TNA4.3%-77.0%
Historically, the rotation strategy significantly outperformed simply buying and holding either leveraged ETF while experiencing much smaller drawdowns.
What Could $1,000 Grow Into?
Assuming the strategy continued to achieve the same 136.9% annualized return observed during the historical backtest, a $1,000 investment would have grown approximately as follows:
StrategyAnnual ReturnValue After 5 Years*Rotation Strategy136.9%≈ $74,700Buy & Hold TQQQ40.8%≈ $5,540Buy & Hold TNA4.3%≈ $1,235
Comparison
Starting with $1,000:
Rotation Strategy ≈ $74,700
TQQQ Buy & Hold ≈ $5,540
TNA Buy & Hold ≈ $1,235
This illustrates the power of compound growth—earning returns on both your original investment and your accumulated gains over time.
*Important: These figures are based on historical backtesting and assume the same annualized return continues for five years. Actual future performance will almost certainly differ, and returns are not guaranteed.
Important Risk Disclosure
No investment strategy can predict the future with certainty.
This strategy uses historical price data, trend analysis, and quantitative models to estimate which of the three positions—TQQQ, TNA, or CASH—has the highest probability of delivering favorable risk-adjusted returns.
While historical backtests have shown strong results, past performance does not guarantee future results.
Investing always involves risk, including the possible loss of principal. Leveraged ETFs such as TQQQ and TNA are significantly more volatile than traditional ETFs and may not be suitable for all investors.
Investors should carefully consider their financial objectives, investment experience, and risk tolerance before using this strategy. Historical performance is intended for educational and informational purposes only and should not be interpreted as a guarantee of future returns or investment advice.