I was just stewing over my recent ETF option trade performance, which seemed less satisfactory than last year’s. (I had just made $65,000 in profits in the past 30 days in my ETF trading after a dismal January/February, so I wasn’t too disconsolate!)I ran the numbers and found that my average profit the past few months (including winners and losers) was only +11% [Fig.1]– compared to last year when for the first six months I was averaging +20% profit per option trade [Fig.2]. Had I lost my touch?
But then I realized I had fallen victim to thinking it’s always the same Market we are dealing with, when in reality “it’s never the same day twice.”
Since I trade a single pattern with a very specific strategy, it is easy to make the mistaken assumption that my results will always be the same. But this year’s market had required me to make some adjustments to the implementation of my two options strategies – and in retrospect I made more money in my options trading than if I had not made these mid-game adjustments.
I only trade ETFs. I have a very specific trading strategy that since I began posting my results publicly in August, 2011, has consistently generated a 90% win rate. I do about 10 ETF trades a month, always using the same pattern. I started a subscription service because I believed that if I could provide ETF setups that won 9 out of 10 times, any good trader could find a way to make substantial profits on these setups.
A couple of years ago I began posting for subscribers the ETF options trades that I was using to amplify the profit from these ETF setups. I used an aggressive approach I called ETF-ATM. As I tracked my results I saw that I was averaging +20% profit per trade and winning about 85% of my trades.
Although the profit performance was good, these were volatile trades – as options trades usually are. And I could only implement this trading strategy on about half of my ETF setups. So I came up with a more conservative strategy, ETF-RS, which could be applied to almost ALL of my ETF setups. It generated about half the profits, +10% per trade, but was less volatile and hence less stomach churning.
And herein lies the clue to the difference in my options trading performance this year. We had a tough pullback in the market in January/February and I got hit with some personal trading losses. Normally there are enough ETF setups that I just trade more frequently, and I make up the losses.
But this year the character of the market was giving me many fewer setups than usual. I wasn’t making my money back fast enough. So I made a strategic decision, and “called an audible” as a football quarterback might do facing a surprise defense formation. I began doing options trades on every ETF setup I could, requiring me to use my less profitable ETF-RS strategy more often than last year.
So it is true I have been less profitable per trade this year. But I have compensated by adding more trades, and you can see from the dollar results that I have actually increased my total options profits. I was more aggressive about using my less aggressive strategy – and it has paid off.
The bottom line is that though I wish I could provide consistent profits month after month for my subscribers, the market is an ever changing master that presents us with a different haiku every few months. But if my basic trading strategy is sound, and I keep methodically implementing this same pattern again and again, then I will continue to increase my trading accounts by a significant amount each year.
Check my blog at https://etfswingtrader.net/blog/ for a post titled “The Smallest Hedge Fund in the World” to see how these option trades were applied aggressively over a 6-week period to generate substantial percentage account profits.
And look for other posts on my website blog for examples of what these setups look like and how I and my subscribers consistently make profits in Up, Down and Sideways markets. See my basic Strategy at https://etfswingtrader.net/etf-swing-trading-strategy, and how I change losing ETF trades into winning trades at Sample Trade https://etfswingtrader.net/sample-swing-trade.