Exploring Successful NASDAQ 100 Trading Models: Monthly vs Active

July 3, 2023

Blog & Resources

By Dan Taylor


Have you ever found yourself contemplating your trading strategy? Considering the vast and dynamic landscape of the NASDAQ 100, finding a model that suits your investment goals and risk tolerance can be challenging.

From the plethora of options available, you've likely encountered the "Monthly" and "Active" trading models. But how do they differ, and which one is right for you? These questions are not trivial. The strategy you employ directly impacts your financial success and growth in the market.

In this article, we'll delve deep into these two trading models. We'll cover:

  • What they entail
  • Their pros and cons
  • How to effectively utilize them for optimal trading

The Importance of Diverse Trading Strategies

Diversity is not just crucial in your investment portfolio; it's equally important in your trading strategies. The stock market, much like the world around us, is perpetually in motion. Prices rise and fall, trends evolve, and market dynamics shift. Hence, a one-size-fits-all approach to trading is a gamble that most investors can't afford to take.

Consider these factors:

  • Risk tolerance: Some investors are risk-averse, preferring slower but steady growth. Others might be comfortable taking on more risk for the potential of higher returns.
  • Time commitment: Active trading requires a more hands-on approach, while passive, longer-term strategies may be more suitable for those with less time to devote.
  • Investment goals: Whether you're investing for retirement, to buy a house, or to build wealth will influence the trading strategy you employ.

Balancing longer-term strategies, such as the "Monthly" model, with more active, shorter-term strategies can provide a well-rounded approach to trading. This mix allows investors to capitalize on both slow and steady market movements as well as quick, opportunistic trades.

In our quest for an effective trading strategy, we'll also touch upon the Trend Strength Indicator (TSI). Our proprietary calculation can enhance our ability to identify top performers and market leaders.

Monthly Trading Model: An In-Depth Look

Let's begin our exploration with the Monthly trading model. This model targets those lucrative market movements that last for months. It's a game of patience, resilience, and calculated decisions. Here's why:

  • Predictable and steady: While the stock market can be unpredictable, there's a certain rhythm in its long-term trends. These trends are the bread and butter of the Monthly trading model.
  • Less time-consuming: As it primarily focuses on long-term trends, it demands less of your time than active trading. This strategy is ideal for investors who want to 'set and forget' their trades.

However, as with all trading strategies, there are potential drawbacks:

  • Slower profits: Patience is the key with the Monthly model. Your profits grow over time, and significant returns can take months to materialize.
  • Potential for larger losses: If a long-term trend reverses, losses can be significant before a stop loss is triggered.

The effectiveness of the Monthly model can be further enhanced using MarketGauge’s TSI calculation and leadership line. These tools help identify market leaders, providing an edge in selecting stocks that are likely to continue their bullish trends.

While the Monthly model may be ideal for some, it may not cater to the needs of those who prefer more active trading. In the next section, we'll explore the Active model, a strategy that thrives on quick market movements that last only a few weeks.

Active Trading Model: A Closer Examination

From the steadiness of the Monthly model, we transition to a model built for speed and agility—the Active trading model. Designed for those with a bit more time and a taste for swift market movements, the Active model has a unique appeal. But what makes it tick?

  • Quick wins: The Active model thrives on shorter-term trends, allowing for more frequent profits. It’s a thrill ride, where your wins (and losses) can happen quickly.
  • High engagement: For those who enjoy staying engaged with the market and making regular trades, the Active model is a fitting choice.

Yet, as with any trading model, there are potential downsides:

  • Time-intensive: Active trading requires more time spent on market analysis and executing trades. It's more hands-on and could be a turn-off for those with less time to spare.
  • Higher transaction costs: With more frequent trading comes higher transaction costs which can eat into your profits.

The Trend Strength Indicator (TSI) and leadership line shine here as well, helping identify those stocks primed for short-term gains. It's about making the most of rapid market movements and seizing opportunities as they arise.

Comparing Monthly and Active Trading Models: Which One Suits You?

Now that we've dissected the Monthly and Active models, let's put them side by side.

The Monthly model is a more laid-back approach, seeking to profit from slower, steady trends. It's less time-consuming, making it ideal for those juggling busy schedules. However, this strategy demands patience, and the possibility of larger losses if a long-term trend reverses cannot be overlooked.

On the other hand, the Active model is a dynamic, hands-on approach. It offers the potential for quick wins and constant engagement with the market. However, it does demand a significant time commitment and can lead to higher transaction costs.

Here's the truth: no single strategy is universally superior. The best approach for you depends on your risk tolerance, time availability, and investment goals. Most importantly, a well-rounded approach often combines both models. It's about creating a balance that caters to your unique needs and aspirations as an investor.

A Step-by-Step Guide to Navigating the NASDAQ 100 Using Both Trading Models

Creating a sound NASDAQ 100 investment strategy can appear challenging, especially when determining which trading model best suits your needs. However, by following these steps and understanding the potential benefits of an automated system like MarketGauge’s NASDAQ 100 All-Stars, you can effectively manage this task.

Analyze the Market

The first step is analyzing the market. You're looking for the most robust performers. The TSI is instrumental here—it uses multiple timeframes to pinpoint market leaders.

Using the leadership line further refines your selection by comparing a stock's performance to a benchmark, allowing you to determine if it's leading or lagging. An automated system can help you immensely in this step, doing the heavy lifting of data analysis and presenting you with concise, actionable insights.

Select Stocks

Next, you need to select the stocks for trading. If you're following the Monthly model, you're interested in stocks showing strong, consistent upward trends—stocks that are likely to yield returns over a longer timeframe. Conversely, with the Active model, you're seeking stocks that exhibit sharp upward movements—stocks that are primed for quick gains.

Again, an automated system like the NASDAQ 100 All-Stars excels here, automatically identifying the top 5 stocks to be long within the NASDAQ 100 Index at any time, catering to both Monthly and Active models.

Manage Risk

Once you have your selected stocks, it's crucial to establish clear stops and targets for each trade. This practice not only protects your profits but also places a ceiling on your potential losses.

In this arena, an automated system shines. It can calculate precise entry and exit points for trades, eliminating the need for you to conduct chart or market analysis.

Rebalance

Lastly, regular portfolio rebalancing is key. This process involves adjusting your portfolio periodically to ensure it aligns with your initial investment goals and risk tolerance. Specifically, a rotation technique can be applied—selling off stocks that are not performing well and buying into sectors that are showing promise.

A high-quality automated system will simplify this task by keeping track of all positions and alerting you when it's time to make changes.

Ready to Start Trading the NASDAQ 100? We Can Help

You already know more than the average investor when it comes to the NASDAQ 100. But there are highly advanced tools that can help you be a more efficient investor.

If you want to unlock your trading potential, we have a tool for you: the NASDAQ 100 All-Stars Trading Model. Learn how to harness the power of this automated system and make the most out of your NASDAQ 100 trading. Here's the results we've achieved so far:

Performance of the NASDAQ 100 All Stars:
Since 2008: +1910.7% vs. QQQ: +769.6%
Avg. Annual: +24.3% vs. QQQ: +17.4%