Trading Strategy Developer of the Month:
Jim Totaro
Jim runs the C2 trading strategy called ETF Volatility Timer. Jim was a Certified Public Accountant for much of his career. After graduating Summa Cum Laude from St. John's University, he joined KPMG, one of the Big 4 accounting firms, and began auditing publicly-traded companies. He left KPMG to work at both public and private firms. With each position came increasing responsibility, including a role as Chief Financial Officer. But accounting wasn't where his heart was. As he tells Matthew Klein from Collective2, he was, first and foremost, a trader. |
![]() Jim Totaro, C2 Strategy Developer |
![ETF Volatility Timer Monthly Returns](https://collective2.com/cimages/image_ojyi3KZod8HSRZWTmFAD.png)
![Performance Graph Over Time](https://collective2.com/cimages/image_vig6PhITE4La0fJMtleM.png)
Past results are not necessarily indicative of future results. These results are based on simulated or hypothetical performance results that have certain inherent limitations. There is a substantial risk of loss in trading. Online trading of stocks and options is extremely risky. Assume you will lose money. Don't trade with money you cannot afford to lose. See warning at bottom of this page.
ETF Volatility Timer uses single and double-leveraged volatility ETFs and ETNs to try to outperform the S&P index.
C2: You came fairly late in your career to trading. What happened?
Jim Totaro: First of all, I'm not sure I agree with your statement. Saying I arrived at trading "late in my career" implies I don't have much of a career left. Not a very encouraging way to start an interview.
C2: Sorry. Let me start again. In the late 1990's, something happened to you.
Jim Totaro: Much better. Thank you. Yes, I had been a CPA at the beginning of my career. I was involved in every aspect of financial statement preparation. But one of my roles was to work with outside brokers on the investing of my companies' 401(k) and pension plans. One of the things that struck me during this time was that there had to be a better way to consistently beat the S&P 500 index.
C2: So let me guess the rest of the story. One day you quit your job in a huff and told your boss, "I can do better!"
Jim Totaro: No, not at all. I'm a CPA. We don't do anything in a huff. In fact, I spent several years working quietly on my own - just as a hobby - developing proprietary technical indicators based on price and volume. These indicators ultimately would form the basis of my trading and my strategies. Finally, around fifteen years ago, I struck out on my own and became a full-time trader.
C2: Tell me about your strategy, ETF Volatility Timer.
Jim Totaro: My goal was to create a trading strategy that was consistently profitable and had low drawdowns. Also, I didn't want to have any single-stock risk, and I wanted minimize overnight exposure.
C2: Thus your use of ETFs...
Jim Totaro: That's right. As a trading vehicle, ETFs are great. No one likes waking up one morning and reading in the newspaper that the company he or she has invested in just lost 30% of its value when the CEO resigned in murky circumstances. By using ETFs - which are baskets of stocks, bonds, futures, or currencies - you can lower the risk of being blindsided by a single company event.
C2: How has ETF Volatility Timer performed so far?
Jim Totaro: Funny you should ask. Before this interview, I went over to that great feature you have on Collective2 - the one you call The Grid.
C2: The Grid lets you compare all of C2's trading strategies using whatever metrics you want.
Jim Totaro: Right. So here's what I did. Using C2's The Grid, I asked C2 to display all the trading strategies that met the following conditions:
- Over 365 days old
- Completed over 100 trades
- Annual hypothetical return of over 15%
- Maximum drawdown of under 10%
- Trade "win rate" of over 75%
Do you want to know how many trading strategies qualified using these metrics?
C2: Let me guess...
Jim Totaro: Just one. Mine. ETF Volatility Timer.
C2: A cynic would say, "Sure, that's great, Jim. Your trading strategy went up, but so did the S&P. All you're doing is leveraging S&P performance using ETFs."
Jim Totaro: There's some truth in that, but here's what I would say in response. In the 23 months ETF Volatility Timer has been on C2, it has been profitable for 21 months (91%), including being profitable for the past 10 consecutive months (from June 2014 through March 2015).
In these last 10 months, the S&P 500 index has been up for 5 months, and down for 5 months. So ETF Volatility Timer has made money in both positive and negative market environments. In fact, since its inception on May 23, 2013, of the 332 trades completed, 89% have been profitable.
C2: That's pretty impressive. What's the downside?
Jim Totaro: Well, of course there are no guarantees that future performance will look like the past. And traders also need to be aware that, because a majority of trades are made intraday, your US broker will most likely classify you as a Pattern Day Trader and, therefore, you would have to trade the strategy in a margin account with an equity balance of at least $25,000.
C2: But assuming you have a margin account and $25,000, you can AutoTrade the system at any Collective2 broker that trades stocks, right?
Jim Totaro: Sure. There are several C2 brokers you can use to AutoTrade it. But you know the list of Collective2-compatible brokers better than me.
C2: We'll point to a web page about that at the end of this interview. Before I let you go, what advice do you want to give to people just starting out on C2?
Jim Totaro: To the people who want to subscribe trading strategies, I would tell them, first and most important: do your due diligence. Know yourself, and understand what kind of strategy most suits you. Start at The Grid, which we already talked about. You can filter all the strategies on Collective2 and choose the criteria important to you -- a strategy's age, number of trades, annualized return, maximum drawdown, percent winners, and so forth.
C2: And what advice do you have for Strategy Developers starting out on C2?
Jim Totaro: C2 is a great site to make money at something you enjoy doing. But in order to generate revenue on C2 you have to be able to get and keep subscribers.
The best way that I have found to generate subscribers is to not worry about getting subscribers for at least the first three months that you're on C2.
In my 15 years as a full-timer trader, I've had many discussions with hedge-fund managers, investors, and financial advisors. What they are looking for, and what I believe subscribers on C2 are looking for, are trading strategies that are consistently profitable, with low drawdowns and low correlations to the S&P 500. While it may seem counterintuitive, they would gladly give up some upside in annualized returns in return for consistency of results and minimal drawdowns. That's what I'm trying to achieve with ETF Volatility Timer.
And, of course, it's fine if you develop a trading system with the intention of producing very high annualized returns, so long as you can control the risk and resulting drawdowns. But be aware that, if you do suffer a big drawdown, you will most likely get bad user reviews on Collective2, and experience significant losses of your subscriber base.
C2: So, to summarize, your advice is to minimize drawdowns and risk, even if it means reducing upside.
Jim Totaro: Exactly.
C2: Thanks for spending time with me, Jim.
Jim Totaro: My pleasure.
Learn more about ETF Volatility Timer
List of C2-compatible Autotrade Brokers
Special Discount for Readers of This Interview Jim is graciously offering new subscribers a discounted rate. Instead of the usual monthly charge of $65 for his strategy, new subscribers who subscribe before June 30, 2015 will receive a lower rate of $55, good for as long as they continue to subscribe. Use the coupon code UGIG45474 when subscribing. |
About the results you see on this Web site
Past results are not necessarily indicative of future results.
These results are based on simulated or hypothetical performance results. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
You may be interested to learn more technical details about how Collective2 calculates the hypothetical results you see on this web site.
Material assumptions and methods used when calculating results
The following are material assumptions used when calculating any hypothetical monthly results that appear on our web site.
- Profits are reinvested. We assume profits (when there are profits) are reinvested in the trading strategy.
- Starting investment size. For any trading strategy on our site, hypothetical results are based on the assumption that you invested the starting amount shown on the strategy's performance chart. In some cases, nominal dollar amounts on the equity chart have been re-scaled downward to make current go-forward trading sizes more manageable. In these cases, it may not have been possible to trade the strategy historically at the equity levels shown on the chart, and a higher minimum capital was required in the past.
- All fees are included. When calculating cumulative returns, we try to estimate and include all the fees a typical trader incurs when AutoTrading using AutoTrade technology. This includes the subscription cost of the strategy, plus any per-trade AutoTrade fees, plus estimated broker commissions if any.
- "Max Drawdown" Calculation Method. We calculate the Max Drawdown statistic as follows. Our computer software looks at the equity chart of the system in question and finds the largest percentage amount that the equity chart ever declines from a local "peak" to a subsequent point in time (thus this is formally called "Maximum Peak to Valley Drawdown.") While this is useful information when evaluating trading systems, you should keep in mind that past performance does not guarantee future results. Therefore, future drawdowns may be larger than the historical maximum drawdowns you see here.
Trading is risky
There is a substantial risk of loss in futures and forex trading. Online trading of stocks and options is extremely risky. Assume you will lose money. Don't trade with money you cannot afford to lose.