The $100,000 ETF & ETN Challenge: Success, A Matter Of Perspective?

by: Kinetic Investments

By Bert Wilkison

In order for this article to make sense to those who haven't read the first installment of this two-part series, it may be prudent to read this and this first.

Another challenge come and gone, and another exciting and educational week of trial by fire for me. This particular challenge, unlike the last one, was more of an experiment than anything. Prior to this, I had never spent any amount of time, money, or energy only trading ETFs and ETNs in one account, but my extensive history of trading them along with equities has proven quite fruitful over the years. While I was confident that I would accomplish my objective, I fell short of my 4-day-10%-gain by a little more than 7%, ending the week up by $2,757.00 (half of which will be going to charity).

On the week, I utilized SOXL, SQQQ, SOXS, FAS, URTY, TZA and XLE to my disadvantage and TYH, QQQ, ERY, FAZ, TYP, ERX, TNA and VXX to my advantage.

As with the last challenge, I feel a small weight has been lifted from my shoulders. I took a notable risk this past week, and certainly one that I could not stomach. Two bad days and two good ones. So what went wrong? Some would say nothing at all, but I say:

For starters, I believe I underestimated the amount of time I would have to spend on the 4-day portfolio. I decided to try to allocate about 20% of my time during regular session trading hours to the ETF & ETN portfolio, while focusing the rest of my time and effort on my regular responsibilities (where the REAL money comes from). It seemed to make sense to start the challenge, but after the second day of losses, I quickly found that in order to realize a consistent level of daily gains, I would have to treat the ETF & ETN portfolio as I would any other: give the all-important money the time and attention it deserves.

I found that for the most part, trading in and out of ETFs is much like heavily trading highly volatile or high volume and high beta equities. You have to keep yourself glued to a chair and hyper-focus on the task at hand. For example, we banked nearly three times as much money while focused on trading in and out of VIVUS (NASDAQ:VVUS) and Sears Holdings (NASDAQ:SHLD) over the course of approximately three hours (when you tally it all up) than I did with the ETFs and ETNs all week.

I am not one for excuses, but it has been pointed out to me by many that I picked a terrible week for a challenge. Unfortunately for me, volatility and volume were simply not there in what was essentially a flat short-week for all the major U.S. indices. While that didn't help me any, it's no reason for falling as short of my objective as I did. If I kept my ear to the rails a bit more, I would surely have taken advantage of the many opportunities the market gave me to turn the roughly $100k into $110k. Missing most of the trading day on Wednesday due to extenuating circumstances didn't help any either. I should have immediately moved to 100% cash every time I left my machine or was occupied with other trading activities for more than 15 minutes, let alone several hours. Very foolish of me.

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I left myself a relatively deep hole to clamber out of come Thursday morning, but that just about lit a fire beneath me to break out of the red and close in on the 10% objective more than anything. I also realized that posting every trade to Stock Talks and Twitter was a time-consuming distraction, so I put an end to that. All said, the challenge wasn't a complete failure. Something is always better than nothing.


Lastly (and as always), when trading: never be afraid to pull the trigger and book a profit when it is there for the taking, and know when to cut your losses before they become seemingly insurmountable. So long as you remain emotionless, stick to your disciplines and strategy, remain confident in your abilities, and are right more times than you are wrong, you are likely to have more profitable years than otherwise, as well as greater market longevity. And to the first person who comments on the taxes I will have to pay for what some would call a nominal gain: The more I pay in taxes each year, the better a year I had.

As a final note:

Dow last week: +0.25%
S&P last week: +0.33%
NAQDAQ last week: +0.42%
ETF & ETN portfolio last week: +2.75%

On to the next one, I suppose.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.