Drawdown Dip Buyer + 8% Target on QQQ

Invesco QQQ Trust: tracks the Nasdaq-100, a tech-heavy growth index. Backtest 2021-01-04 to 2026-10-02, $10,000 starting capital, computed by the same engine that runs live DeployQuant strategies.

The drawdown dip buyer waits for QQQ to fall more than 10% below its 20-day high, buys at the open with 98% of the sleeve, and rests a limit order 8% above the entry price. It has no stop. The result was 5.37% a year, a final value of $13,501, a max drawdown of 28.56% and a Sharpe of 0.41. Buy-and-hold QQQ made 16.7% a year, ended at $24,265, and had a 34.23% max drawdown with a Sharpe of 0.83.

The rule made 4 round trips and won all 4. Every trade closed at the 8% target, which is why the best trade, the worst trade and the average win all read 8%. It was invested 30.4% of the time and held for 160 days on average. On the 12 templates run on QQQ, it ranks last by CAGR, below the weekly 7% target at 16.52% and the RSI(2) snapback at 14.17%. QQQ ranks 15th of 59 funds for this strategy.

A 100% win rate sounds strong. Four trades is a very small sample, and the equity curve is set by how long those four trades took. One of them lasted 542 days and ran through the 2022 decline.

The headline run has no fees or slippage. Cost runs at 5 and 10 basis points change almost nothing, because there were only 8 fills. All numbers describe one backtest on one fund in one window and do not forecast a later period.

Year by year

How each year looked for a rule that trades once or twice a year

The rule returned 7.8% in 2021, negative 24.4% in 2022, 42.6% in 2023, 7.8% in 2024, 7.8% in 2025 and 0% in 2026 to date. Buy-and-hold returned 28.4%, negative 31.7%, 53%, 25.1%, 20.4% and 22.1% in those years. It beat holding in 2022 by 7.3 points and trailed in every other year, by 20.6 points in 2021, 10.4 in 2023, 17.3 in 2024, 12.6 in 2025 and 22.1 in 2026.

The repeated 7.8% in 2021, 2024 and 2025 is one trade each. An 8% gain on 98% of the sleeve gives 7.8% for the account. In each of those years the rule waited for a dip, bought it, hit the target, and then sat in cash until the year ended. The rest of the year was idle, while QQQ earned 28.4%, 25.1% and 20.4%. The rule's 2026 return of 0% reflects no trade at all: QQQ rose 22.1% that year to date, and the rule never saw a 10% dip from a 20-day high.

The 2022 and 2023 results come from a single trade. The rule bought on 2022-01-21 and sold on 2023-07-17, a hold of 542 days. In between it carried the full 2022 decline, which is why 2022 shows negative 24.4%, and then took the 2023 recovery, which is why 2023 shows 42.6%. The trade closed at exactly 8% because QQQ got back to the entry price plus 8% in July 2023. Between those dates the account was fully invested, with a max drawdown of 28.56%.

The pattern is different from what the rule's description suggests. A dip buyer with a modest target is meant to take small, quick profits. In this window, three of the four trades did that, with holds of 27, 8 and 63 days. The fourth turned into a year-and-a-half position because the dip kept going after the entry. The account's result is dominated by that one trade.

Month by month

Months with no activity and the months that mattered

Most of the monthly table is zeros. The rule was invested only in a handful of months, and in the rest the account sat in cash and earned nothing. Across the window, the nonzero months cluster in four groups: 2021-03 and 2021-04, 2022-01 through 2023-07, 2024-08, and 2025-03 through 2025-05.

The first trade entered on 2021-03-09 at an adjusted price of 296.75 and exited on 2021-04-05 at 320.49. The monthly returns were 3.81% for 2021-03 and 3.88% for 2021-04. After that, the account earned nothing from May 2021 until January 2022.

The long trade covers 2022-01 to 2023-07. The monthly returns are 1.08% in January 2022, then negative 4.31%, 4.27%, negative 13.06%, negative 1.52%, negative 8.61%, 12.08%, negative 4.95%, negative 10.02%, 3.86%, 5.36% and negative 8.69% through December 2022. The worst month of the whole backtest was 2022-04 at negative 13.06%, and the best was 2022-07 at 12.08%. Buy-and-hold also had its worst month in 2022-04, at negative 13.14%.

The recovery months in 2023 were 10.21% in January, negative 0.39% in February, 9.16% in March, 0.52% in April, 7.5% in May, 6.24% in June and 3.63% in July, when the target was reached. After that the account was flat for a year. The 2024-08 month shows 7.8%, the trade from 2024-08-05 to 2024-08-13. The last trade shows negative 0.62% for 2025-03, 1.36% for 2025-04 and 7% for 2025-05, spanning 2025-03-11 to 2025-05-13.

The monthly pattern also shows how little of the window the rule used. Zeros fill 2021-05 through 2021-12, 2023-08 through 2024-07, 2024-09 through 2025-02 and every month of 2026. For a reader looking at the table, the rule is a series of short appearances.

Every trade

dip buyer on QQQ made 4 closed round trips, an average hold of 160 days, an average winner of 8.00%. It held a position at the close on 30.4% of trading days.

Prices are adjusted for splits and dividends, so they sit below the quotes printed at the time. An open position is marked at the last close.

The four trades

All four trades closed at the 8% target, and the median hold was 63 days. They are short enough to list in full.

The first entered on 2021-03-09 at 296.75 and exited on 2021-04-05 at 320.49, a gain of 8% in 27 days. The second entered on 2022-01-21 at 348.5 and exited on 2023-07-17 at 376.38, a gain of 8% in 542 days. The third entered on 2024-08-05 at 419.79 and exited on 2024-08-13 at 453.37, a gain of 8% in 8 days. The fourth entered on 2025-03-11 at 468.66 and exited on 2025-05-13 at 506.15, a gain of 8% in 63 days. Prices are adjusted for splits and dividends, so they are lower than the quotes printed at the time.

The 8-day trade started on 2024-08-05, two days before the trough of QQQ's 13.31% drawdown from 2024-07-10 in the buy-and-hold record. The rule bought near the low and was out by 2024-08-13. The 63-day trade bought on 2025-03-11, several weeks before the 2025-04-08 low of the 22.38% buy-and-hold drawdown. It rode a further decline, and its monthly returns of negative 0.62% in March and 1.36% in April are small next to the swings in the fund. It sold into the rebound on 2025-05-13.

The 542-day trade is the one that matters. The entry on 2022-01-21 was 2 months after the QQQ peak of 2021-11-19. The rule bought a dip that turned out to be early, and the fund continued to a trough on 2022-11-03. The position was down at that point, and the 8% target was only reached on 2023-07-17, after 542 days. During that time, the account could not enter any other trade, because the rule buys only when flat.

That is the structural limit of the design. It has no stop, so an entry made in the early part of a long decline is held until the whole decline and recovery have run. The four trades have a perfect record, and one of them occupied the account for 542 days. There was no losing trade in the window, and one trade that came close to a very different outcome. If QQQ had not recovered to 376.38, the rule would still be holding.

Largest drawdowns

Buy-and-hold's deepest drawdown ran from 2021-11-19 to 2022-11-03 and reached −34.2%.

The drawdowns came from one trade

The deepest drawdown was 28.56%, from the peak on 2022-03-29 to the trough on 2022-11-03, and it recovered on 2023-06-15. It took 219 days down and 224 to recover. This is the long trade. Buy-and-hold QQQ had a 34.23% drawdown over a similar stretch, from 2021-11-19 to 2022-11-03, and recovered on 2023-12-12. The rule's drawdown was 5.67 points shallower, since it entered in January 2022 and missed the first part of the fall.

The second drawdown was 15.24%, from 2025-03-25 to 2025-04-08, recovering on 2025-05-12. It took 14 days down and 34 to recover. It sits inside the fourth trade, which entered on 2025-03-11. Buy-and-hold fell 22.38% in the same episode, from 2025-02-19 to 2025-04-08.

The third was 13.25%, from 2022-02-02 to 2022-03-14, recovering on 2022-03-29. It began 12 days after the long trade's entry and is the first leg of the decline that the position carried. The three drawdowns all sit inside the two trades that were open during the two big falls.

A drawdown of 28.56% on a rule with a 5.37% CAGR is a poor trade of risk for return. The Sharpe of 0.41 against 0.83 for holding shows it. The cause is that the rule has no stop and the dip it bought in 2022 was the start of a larger one. The drawdown is shallower than holding's, but the return is far lower.

With trading costs

The headline run fills at the bar price. These runs charge slippage on every fill.

Why costs barely matter here

At 5 basis points the CAGR is 5.37%, the max drawdown is 28.58% and the end equity is $13,503. At 10 basis points the CAGR is 5.37%, the max drawdown is 28.59% and the end equity is $13,505. The Sharpe is 0.406 in both. The figures are almost the same as the headline run, and the end equity differs only by a few dollars, which comes from small differences in fills.

The reason is the fill count. The rule made 8 fills in 5.74 years, four entries and four exits. A cost of 5 or 10 basis points on 8 fills is a rounding error on a $10,000 account.

The cost result is the opposite of what the same fund shows for the RSI(2) snapback, which makes many trades and loses a large share of its return to costs. A rule that trades rarely is cheap to run. In this case it is cheap because it does little, and the low return is the other side of that.

Changing the parameters

What a shallower trigger and a different target do

Four variants change one parameter each. Entering at a 7% drawdown instead of 10% gives a CAGR of 15.41%, a max drawdown of 28.16%, a Sharpe of 0.866, and 11 trades that all won. Entering at 15% gives 5.33%, a 20.75% drawdown, a Sharpe of 0.449 and 4 trades that all won. A 6% target gives 5.37%, a 28% drawdown and 5 trades, and a 10% target gives 6.72%, a 28.03% drawdown and 4 trades.

The 7% entry is the large change. It returns 15.41%, close to the 16.7% for holding, against 5.37% for the base rule. It made 11 trades, all wins, where the 10% rule made 4. The shallower trigger entered earlier, more often, and was flat less. This result shows how sensitive the rule is to its entry level: moving the trigger from 10% to 7% moved the CAGR from 5.37% to 15.41%.

The sensitivity is a warning as much as a finding. Both numbers come from the same 5.74-year window, and a choice made after seeing that the 7% variant did better would be tuned to this window. The 11 wins still depend on QQQ recovering after each entry, which it did in every case here. The drawdown of 28.16% is almost the same as the base rule's 28.56%, so the shallower trigger did not avoid the 2022 decline. It entered more times around it.

The 15% entry made the same 4 trades with a 5.33% CAGR and the shallowest drawdown at 20.75%. A deeper trigger waits for a bigger fall and buys later in it. The result is little different in return from the base rule, with a smaller drawdown.

The target changes matter less. A 6% target made 5 trades and returned 5.37%, the same CAGR as the base rule. A 10% target made 4 trades and returned 6.72%. Neither target changes the drawdown much, because the drawdown comes from the long 2022 hold, and a different target does not shorten it by much. A higher target means a bigger win per trade and a longer wait.

How QQQ behaved

Why QQQ gave this rule few chances

QQQ returned 151.07% over the window on its own price series, 17.39% a year, with annualized volatility of 22.39% and a max drawdown of 35% from 2021-11-19 to 2022-11-03. It recovered on 2023-12-12 and spent 516 sessions under a prior high. Calendar years were 29.18% in 2021, negative 32.39% in 2022, 54.81% in 2023, 25.59% in 2024, 20.77% in 2025 and 22.44% in 2026.

The entry condition, a 20-day drawdown worse than 10%, was met in 21 separate events covering 82 sessions. The rule took only 4 trades. The rule can buy only when flat, so a signal that arrives while a position is open is ignored, and a long position blocks every signal after it.

QQQ closed above its 200-day average on 75.18% of sessions and crossed it 20 times. The fund spent most of the window in an uptrend, with a few sharp breaks. The 14-day RSI closed under 30 on 15 sessions with a median 5-day forward return of 3.69% against a baseline of 0.56%. The 2-day RSI closed under 10 on 144 sessions with a median 5-day return of 0.8%. Short dips are common and 10% dips inside 20 days are rarer, and this rule trades the rarer kind.

The average up day was 1.01%, the average down day was negative 1.06%, and the average intraday range was 1.58%. QQQ rose on 54.82% of sessions. The best days were 11.75% on 2025-04-09 and 7.37% on 2022-11-10, and the worst were negative 6.1% on 2025-04-04 and negative 5.52% on 2022-09-13. The fourth trade's entry on 2025-03-11 came before the 2025-04-04 and 2025-04-03 losses, and its exit on 2025-05-13 came after the 2025-04-09 rebound, so it held through all three of the largest moves of that spring.

QQQ beta to SPY was 1.29 and its correlation to SPY was 0.94. The overnight share of log return was 64.64% and the intraday share was 35.36%.

How other broad funds compare

Across the broad index group, this rule's median CAGR was 4.11% and its median across all 59 funds was 1.33%. QQQ at 5.37% is above both. The best result in the group is IOO at 8.28% with a 10.81% drawdown and 6 round trips. EEM made 7.14% with 5 trades and a 26.19% drawdown, QQQE made 5.41% with 4, and QQQM made 5.35% with 4 and a 28.64% drawdown, almost the same as QQQ.

Further down, VOOG made 4.11% with 3 trades, VOOV made 4.03% with a 4.52% drawdown, and VTV made 4% with a 4.37% drawdown. IWM made 3.08% with 2 trades and a 25.93% drawdown. VV made 2.65%, VOO 2.62% and SPY 2.61%, each with 2 trades.

The value funds show the opposite risk profile to QQQ. VOOV and VTV had drawdowns near 4.5%, while QQQ, VOOG and IWM had drawdowns above 25%. The dip rule's risk depends on whether a 10% dip was the start of a bear market, and QQQ's was.

Trade counts across the group range from 2 to 6. Every fund's result is set by a handful of trades. The ETF page for QQQ lists all 12 templates on the fund, and on it the dip buyer is the weakest by CAGR. The strategy hub shows the same rule across all 59 funds.

The rules

Wait for a 10% drawdown from the 20-day high, buy it, and take profit at +8%.

A rule-based buy-the-dip. The entry is a measured 10% drawdown inside the trailing 20 sessions, and the exit is a resting +8% limit order. Between signals the sleeve sits in cash, so the template can wait months for an entry.

Good for: assets that sell off hard and recover; it trades volatility without chasing strength.
Watch out: no stop-loss: if the dip keeps falling, the position rides it down until the +8% target is reached or the strategy is stopped. Trade counts are low, so single trades dominate results.

How the entry and exit rules interact

The entry rule is checked at the market open when the strategy is flat. It buys with 98% of the sleeve if the 20-day drawdown is worse than 10%. The exit is a limit order resting at the entry price times 1.08 for as long as the position is open. There is no time stop, no loss stop and no re-entry while invested.

Those three missing pieces explain the results. With no loss stop, the 2022 trade was held through a drawdown of 28.56%. With no time stop, it stayed open for 542 days. With no re-entry while invested, the 21 dip events in QQQ's history were reduced to 4 trades. The limit order is what gives the rule its 100% win rate: every trade ends at the target or stays open. A rule built this way cannot record a loss until it is closed by hand, so the win rate describes only the trades that closed.

The account was in cash for most of the window, and the cash earned nothing in the backtest. That is a second cost of the design, and it fits the 7% entry variant doing much better, since that variant made more trades. The golden cross at 13.6% and the 200-day regime filter at 12.9% rank well above the dip buyer on this fund.

On QQQ the rules interacted badly because the fund fell for the better part of a year after the first 10% dip. A fund that dips and recovers quickly, as QQQ did in August 2024, gives the rule a good trade in 8 days. The same rule on the same fund held a position for 542 days when the dip was the start of a bear market.

Related

Backtests are hypothetical, computed by DeployQuant's engine on minute-resolution consolidated US market data (2021-01-04 to 2026-10-02, $10,000 starting capital, no margin, no fees or slippage in the headline run; buy-and-hold puts 98% of the account in at the first open, as the templates do) and do not guarantee future results. Nothing on this page is investment advice. Live trading involves risk of loss.