Monthly Archives: January 2014

Three Policy Tools of The Fed

three policy tools of fed

Learn the three policy tools The Fed uses to influence markets and the economy…

Three Policy Tools of the Fed are used to shape monetary policy. And given the Fed’s active hand in markets these days, it makes sense to revisit the different policy tools the Fed can use. So what are the three policy tools of The Federal Reserve Board and The Federal Open Market Committee?

In this blog post we’ll walk through the three policy tools of The Fed. We’ll look at the goal of each policy tool, how it works and what some of the weakness or criticisms are. So by the end of the blog post you should have a good understanding of the three policy tools of the Fed, and how they apply to stock markets.

Three Policy Tools of The Fed:

The Fed is the American central bank responsible for the USD. It is not an arm of government but a private bank responsible for overseeing the monetary supply on behalf of the US Treasury department. It’s a bit of a weird arrangement, but the main thing to know is The Fed is responsible for monetary policy, while the government is responsible for fiscal policy.

So here are the three policy tools the Fed uses to control monetary policy…

Open Market Operations: This is the active hand of The Fed. Open Market Operations, conducted by the Federal Open Market Committee have been in the news a lot lately, as The Fed uses quantitative easy to buy bonds and mortgage backed securities from the primary dealers. It sounds kind of crazy, but basically The Fed increases the money supply by buying up securities and crediting the amount to the banks it buys them from. The Fed actually publishes it’s calendar for open market operations so you can see for yourself what kind of securities they are buying and when. Make sense?

While open market operations are controlled by the FOMC, the following two policy tools are determined by The Federal Reserve Board of Governors…

Discount Rate Policy: The federal funds rate is like the foundation of all interest rates because it’s what banks loan each other overnight when they have reserves, or need liquidity. The Fed usually announces a target federal funds rate (such as 0-0.25). The prime interest rate (which banks loan to consumers and business above) is usually 300 basis points above the Federal Funds rate. That’s how your ability to borrow and loan money is influenced by The Fed.

Reserve Requirements: These are the final policy tool of The Fed. And they basically dictate how much the bank must keep in reserve. Reserve requirements must be kept in the banks vault, or at the nearest federal reserve bank. By changing the percentage of deposits a bank must hold in reserve, The Fed is able to encourage or discourage lending. Make sense?

So there you have it: An overview of the three policy tools of The Fed.  While The Fed is a confusing (and far from transparent) entity, it’s important to have a basic understanding of the policy tools The Fed can use, and what their impact on stock markets is.

And By The Way: If you’re looking for more in-depth advice on how to refine your investing approach, I encourage you to sign up for the free email updates below. You’ll get exclusive stock ideas and analysis not found anywhere else!

The Secret of Creating Wealth

secret of creating wealth

What’s the secret of creating wealth?

The Secret of Creating Wealth: It’s something everybody wants to know. So if you’re looking for the secret of creating wealth you’ll be happy to know you’ve come to the right spot. And to be honest…

The secret of creating wealth is easier than you think. Believe it or not, there are only a couple fundamental principals that underpin all wealth creation. Sure, they have been expressed in millions of different ways over the past thousands of years.  But the basics are the same. So..

In this blog post we’ll cover the boring secrets of creating wealth. And then I’ll share how you can super-charge your wealth creation…

The Secret of Creating Wealth: The Boring Truth

The secret of creating wealth is actually really simple. You just need to save 10% or more of what you make. That’s it. Spend less than you earn. It’s the foundation of every classic personal finance book. This is step 1. There is no way around it. Hopefully you’re long past that point.

But if you’re still stumbling at the starting blocks with the first step of wealth creation, don’t give up! Check out The Richest Man in Babylon to gt up to speed on the personal finance basics. It’s a great book that’s easy to read. And it will definitely get you started on the path to wealth creation. But don’t get too excited yet.

If you really want to dip deep into the secret of creating wealth, the real truth of how fortunes are built is even more boring. Let me show you what I mean. I promise I’ll be quick.

The Secret of Creating Wealth: The Even More Boring Truth

Now let’s look a little deeper into the secret of creating wealth – spending less than you make. See, if you want to get academic about it, the secret of creating wealth is really about cash flow accounting.  See where I’m going with this?

Just as businesses create earnings for shareholders by diligently building cash flow streams, so should you. Just as businesses trim unnecessary expenses to keep earnings positive, so should you. Your life is like a mini business! Do you see what I mean? Well…

Here’s where the secret of creating wealth gets exciting:

There are basically two ways to manage your personal accounting. You can reduce expenses, and you can increase income. Most people focus on cutting their expenses. But there is only so much money you can save – and hey, life is also worth living right? What’s the point if you can’t enjoy yourself every once in awhile.

So the point is…

A big part to the secret of creating wealth that is often overlooked is growing your own earnings. Just like businesses can invest in themselves, so can you. Invest in skills, education and experience. If you think like a business and focus on how you can grow your earnings streams you will really start to cash in on the secret of creating wealth. You see…

While cutting expenses has limited potential, there is basically no upside to what you can earn. And there are thousands of ways to do it. When you grow your personal earnings you can turbo charge your wealth creation by saving significant amounts of money. And that’s when wealth creation goes from plain and simple to a little more exciting. The key idea is…

Don’t trade your time for money. While that’s good for a stable income you will never get really wealthy that way. Common ways of getting around this little hurdle are: working in sales/on commission or starting a business. There is no end to the way you can increase your income. And when you do that, things really get exciting…

The Secret to Super-Charging Your Wealth Creation:

At this point we’ve covered the basics of wealth creation: Make a habit to save some money each month. We’ve also dug a bit deeper to uncover the next step in wealth creation: Grow your income so you can save large amounts of money each month without compromising your lifestyle. Now here’s the cool part.

When you start to save meaningful amounts of money, you can start to earn asset income. This might be in the form of capital gains, dividends or even rent payment on a house you own. Asset income really gets exciting

If you’re interested in responsible asset management, now that you’ve saved up a significant amount of money, you’ve come to the right place. StockIdeas.org is all about this step of the wealth creation process. So what do I recommend for you?

  1. If you’re new to saving money, check out investment strategies for young adults, or how to invest $5,000.00.
  2. If you’re past the beginner stage and want to get serious, check out The Intelligent Investor. This describes the framework we advocate here at StockIdeas.org
  3. Develop a methodology to analyze the value of investments that makes sense with your own personal experiences and interests. It’ll take a lot of reading and a lot of experimentation. Here are some investing books to get you started.
  4. Refine your thoughts into a simple trading plan. This should have two main parts (a) you need a methodology to find investing ideas and (b) some rules for when you will buy and sell (e.g. how to implement your ideas).
  5. Just start doing it. If you’re new, you can practice first with a stock market simulator. Otherwise, find a source of premium stock picks and start practicing. Be sure to limit your risk

So now that you’ve read all this, I hope you feel like the secret of creating wealth is a little closer. How you apply the principals above will really be up to you, and should reflect your personality, expertise and interest.  Now let me as you…

What’s your Secret of Creating Wealth?

best value investing screen

The Best Value Investing Stock Screen Ideas

The Best Value Investing Stock Screen Ideas are worth checking out, especially when the stock market is correcting. At the beginning of the week I recommended a large cash position to premium subscribers. And I’m happy I did because as prices continue to pull back, more and more value investing opportunities are presenting themselves. And these stock screens can help you find them. So…

There are a couple of different ways to slice the value investing pie. Take a look at the stock screens below to find the perfect value investing idea for you. Just remember, the market is still correcting, so you probably don’t need to run in and buy the dip immediately. Wait until prices start coming back up a little. Patience pays with value investing and swing trading alike.

The Best Value Investing Stock Screen Ideas:

Since the market is still correcting these value investing screens not only look for stocks with a margin of safety, but also relatively strong price performance. Check em out…

High Flying Value Stock Screen: This value investing stock screen looks for stocks trading at a discount to both earnings and asset value. The unique thing about this value investing stock screen is these stocks are still within 0-10% of 52 week highs. These prior leaders should continue higher when the broad market eventually moves higher.  ASMI and MANT look particularly interesting

high flying value stock screen

Find stocks near 52 week highs that are not overvalued.

Insider Value Stock Screen: While this value investing stock screen doesn’t focus exclusively on high flying value investing stocks, it does identify EPS positive stocks that are trading under book value and have seen recent insider buying.  Be careful because these stocks are mostly financials. NTWK is my favorite on the list but it’s a very micro-cap stock.

insider buying value stock screens

Not only are these stocks trading at a discount to their intrinsic value, but insiders have been accumulating shares.

CAN SLIM Value Stocks:  I love this stock screen because it combines value investing fundamentals with CAN SLIM investing criteria. The idea is to find stocks that (1) are fairly valued (2) have had earnings and revenue growth and (3) they have relatively strong price performance. This ensures you aren’t paying too much for the stock, and there are some catalysts to help you get capital appreciation once the market correction is over. SMI looks like the most promising pick here.

canslim value investing stock screen

Find companies that are showing strong price performance, improving earnings and still fairly valued.

The above value investing screens are some of the best to focus on during a pullback. The problem with focusing exclusively on value investing stock ideas during pullbacks is that without any earnings catalysts the bottom can be a very bumpy process. When you look for cheaply traded stocks that also have signs of earnings strength you can really zero in on some of the most actionable value investing ideas. Make sense?

So keep an eye on these value investing screens yourself during this stock market correction. Do you have any tips on how you like to find value investing ideas?

Best Value Investing Blogs

best value investing blogs

Learn what the best value investing blogs have in common…

The Best Value Investing Blogs: If you’re trying to apply value investing in today’s markets then you can’t miss the best value investing blogs. I have been browsing value investing blogs for years and while a lot of value investing blogs have come and gone, the ones listed below have consistently produced some of the best free value investing advice online.

While value investing books like Security Analysis and The Intelligent Investor are must-reads for any would-be value investor, blogs are important too. That’s because the best value investing blogs show you how to take the time-tested “margin of safety” concepts and apply them in a modern sense. And when you’re trying to find value investments in today’s market, there is no better place to look than the best value investing blogs.

List of the Best Value Investing Blogs:

Barel Karsan is a value investing blog that has been offering in-depth analysis of stock ideas for years. There are also a lot of business and investment book reviews, which I really enjoy. The blog is run by another Canadian fund manager – so maybe it has a soft spot in my heart. But these guys keep putting out good ideas and share the results of their fund each quarter. It’s inspiring to see others applying the value investing methodology so diligently and I suggest you check it out too. They also provide the valuable conferencecalltranscript.org service.

AlephBlog  is probably my favourite value investing blog of all. David, the author, is an incredibly experienced investor. And he uses his blog to share diligent commentary and advice for aspiring value investors. This blog would still be good value, even if you had to pay for the content. But it’s free, which is even better. David offers practical and common sense advice to investing, and encourages you to focus on the long term. His 8 rules of investing are a great example of this logical approach.

Classic Value Investors has been around for almost 5 years now. And it continues to offer good guidance and value investment best practice. Although this blog occasionally focuses on macroeconomic stories that aren’t pertinent to value investors, the content is always interesting. And the majority of the blog topics delve deep into specific value investing opportunities. If nothing else it’s always inspiring to see other value investors digging deep into the assumptions and corporate statements the market takes for granted.

Long Term Value is another case of classic value investing being applied every week. Long Term Value often reviews some great investing ideas. But even more than the specific value investing stock ideas, I like the attitude and approach the author of this blog takes. He is careful, consistent and always willing to look at what could go wrong. I think the mindset this offer employs can teach a lot to the novice value investor who is looking for a free blog to learn from.

What Your Favorite Value Investing Blog?

Now that I’ve shared some of my favorite free online blogging resources, I’m curious to learn what you think. Do you have any value investing blogs that you consider the best? I’m always looking to expand the value investing resource-pool I pull from, so any suggestions you might have would be greatly appreciated.

And By The Way: If you’re looking for more in-depth information on value investing, I encourage you to sign up using the form below. You’ll get exclusive investing tips and ideas that you won’t find anywhere else, including my mini-e-book “The Intelligent Swing Trader”

Day Trading or Swing Trading?

day trading or swing trading

Find out the difference between swinging for profits and trading actively each day.

Day Trading or Swing Trading? Figuring out which trading style you want to use can be difficult, especially if you’re an individual investor. There are a ton of variables that can influence your decision on which trading-style to use. And each style of trading has it’s own benefits. So how do you know if day trading or swing trading is the right approach for you? Well…

In this blog post I’ll share a little more information about day trading vs. swing trading, and give you some food for thought on how to decide which approach will work best for you. So while you might not get an immediate answer to the question of whether you should be day trading or swing trading, you will definitely be a lot closer to figuring out the trading style that’s best for you.

Day Trading or Swing Trading: Time Commitment

Day trading and swing trading both require significant time commitments. And if you don’t have enough time or interest to manage your portfolio then you should really hand it off to a professional investment advisor or money manager. But since you found this blog post I’ll assume you have the time, aptitude and interest to focus on managing your own stock picks and ideas (at least to some extent). So with that in mind…

You should know that day trading requires a ton of time and attention during the trading day. D’uh. This should makes sense, since day traders are jumping on opportunity while the market is open, and getting out flat so they can sleep at night. On the other hand…

While swing trading requires you to watch the market as well, you’re likely to be a little bit less focused on opening and closing positions every single day. So if you get called in to a meeting you can use stop losses and limit order to execute your plan for you. While this isn’t perfect, it’s a compromise a lot of swing traders are willing to accept (especially those who have other full-time or part-time work commitments outside the stock market). Of course there are swing traders who are in front of their screens the entire trading day.

In both the case of swing trading and day trading, you’ll need time before, during and after the market open to come up with your trading plans and do research to prepare for the next trading session. However, with swing trading you’re a little bit more likely to hold down a paying job. It’s much harder to “day trade” part-time. But that’s not the only difference…

Day Trading or Swing Trading: Platform Requirements

Compared to traditional buy and hold investing, day traders and swing traders both operate at a much more frenetic pace. You’re moving in and out markets to quickly capture percentage gains and limit losses. While this approach sounds similar for both swing trading and day trading, the truth is there are quite a few differences.

With swing trading, you can probably get by with a simple brokerage account that provides snap quotes and a live data stream of the bid/ask offers for your stocks. Your entries won’t be ideal, but since you’re looking to capture bigger moves happening over the course of a couple days or weeks, your entry point is a little bit less important. On the other hand…

Day traders need to have much better trade execution. If you try to day trade with a simple online brokerage account you are going to run into a lot of trouble. The deck is already stacked against you. At the very least you’ll probably want to Level 2 Quotes so you can have a much better handle on the order flow. The platform requirements for day trading are a reason a lot of day traders work at prop firms or other institutions that provide what they need to get the job done. Make sense?

Day Trading or Swing Trading: Personality and Lifestyle

As insinuated in the section above, a lot of day traders will work full time at prop firms, trading desks or other institutions that provide them with the environment they need to extract cash from the market every single day. Conversely, many swing traders only watch the markets part-time, as they work from home or their office job or while checking their positions in the evening.

To be sure, day traders can work from home too. But on the whole I’d say it’s a little less common. Since swing traders are concerned with finding multi-day or week trades, they take longer to execute, and by necessity there is a bit less to watch each second the stock market is open. Make sense?

Finally, it’s important to think about the kind of lifestyle you currently have (and the one you want) before you decide if swing trading or day trading is for you.

DayTrading, Swing Trading and Longer Term Investing:

In addition to deciding if you want to use day trading or swing trading approaches to improve your stock market returns, you’re also going to want to figure out how these short term approaches will match with any long-term investing goals yo have. Remember…

Trading is a profit-motivated activity. So you don’t want to start trading without any concern for what will happen longer-term to your portfolio of assets. Eroding this wealth would put you in a worse-off place than if you just saved money and didn’t trade. You know what I mean? So…

Think about what percentage of your assets you will use to swing trade or day trade. These techniques should ideally augment your longterm investment strategy, so be sure to consider the big picture of wealth when trying to decide between day trading and swing trading. Don’t lose sight of why you’re hoping to improve your trading.

And By The Way: If you’re still curious to learn how you can use short-term trading techniques to augment your returns, I encourage you to check out my free mini-ebook. You can sign up below to get exclusive access to my methodology for incorporating swing trading techniques into value investing approaches

 

Best Swing Trading Indicators

best swing trading indicators

Read this post to learn the best swing trading indicators…

The Best Swing Trading Indicators can help you improve your stock trading returns. So in this blog post I’ll share some of my favourite swing trading indicators, and how I use them to try and time my buying and selling of shares in the stock market. Sound good?

Keep in mind, swing trading indicators (even the best ones) should be used in conjunction with other types of analysis. Additionally, each swing trading indicator has pros and cons. Some work better in trending markets and others work well during consolidation. So…

Just remember when you’re browsing the list of the best swing trading indicators below that you need to keep the big picture in mind.

Best Swing Trading Indicators:

Moving Averages – In a trending market, moving averages are the best swing trading indicators. They clearly demonstrate the price momentum of your stock, over short, intermediate and long-term time frames. The slope of the moving averages can better help you understand the strength of the trend. If you want to learn more about moving averages, read this post about how to use moving averages to trend-trade.

Trend Lines – You might call trend lines the most basic swing trading indicators. But with simplicity comes power. You can draw trend lines over both long and short term time frames to help you identify the controlling technical pattern. Thus, trend lines can help you get perspective on the market and understand high probability places to initiate swing trades.  While trend lines might sound like a simple swing trading indicators. Stockcharts.com gives great insight into the best way to draw trend lines.

Bollinger Bands – During both consolidation and big price trends, Bollinger bands are useful indicators for swing traders. Bollinger bands can foretell a large move during consolidation. And Bollinger bands are a swing trading indicator that can also hep you understand when stocks are overbought and oversold. Read this blog post to learn more about how to ring the register with Bollinger bands.

Relative Strength Index (RSI) – This relatively easy to use swing trading indicator can help you understand how overbought or oversold your stock is. It can also give insight into the bearish or bullish momentum your stock has. I personally don’t use RSI as much as the above indicators, but a lot of traders reference it, as well as MACD. My favourite example of how to use RSI is this Chessnwine blog post.

There are a ton of swing trading indicators, but the above are some of the best!

And in addition to the above trading indicators I always look at volume patterns. Finally, you should know I exclusively use swing trading indicators and techniques on long term investment ideas that meet my fundamental investment criteria. All this helps gives me more conviction in my stock ideas. But enough about me.

I encourage you to experiment with these swing trading indicators and any other momentum measuring techniques that might catch your curiosity.  And now that you’ve heard from me, I want to ask you… what do you think are the best swing trading indicators?

And By the Way: If you’re looking for more swing trading techniques to improve your stock market profits, sign up for my newsletter below. You’ll get access to my favorite tips and resources to improve your portfolio returns.

transocean analysis 2014

Transocean Ltd (RIG) Analysis 2014

Here’s a Transocean Ltd (RIG) Analysis for 2014. RIG came to my attention after a follower on Stocktwits mentioned it as a potential value investment opportunity. At a glance, RIG is trading to a discount to other publicly traded oil and gas exploration companies. So I thought it was worth further analysis:

Fundamental Valuation Overview:

RIG caught my attention and warranted further analysis because of the conservative fundamental valuation the company receives. Compared to a number of peers RIG appears cheaply valued. This is seen in the low PEG ratio, the sub-10 PE and the share price hovering below book value. While RIG has modest debt levels the current ratio near 2 implies liquidity is not a pertinent threat. And really…

It’s not often that you see major large cap companies trading at a discount to both current and future earnings, as well as a discount to assets (book value). To sweeten the deal, RIG also pays a 5% dividend.  Arguably the oil exposure is also a bit of a hedge against inflation in the coming year or two. And while all of this is what value investors love to see, there must be a reason for this cheap valuation, right?

RIG has been dead money for almost 2 years now. But it looks like some of these problems might be in the rear view mirror, so let’s dive a little deeper…

RIG Growth Narrative Analysis:

RIG has under-performed the market the last couple of years.  Margins have come under pressure due to under-utilization and lower day rates. While global growth remains slow, it’s reasonable to expect oil demand to slowly increase over the coming years. New deep water discoveries in the Gulf of Mexico also bode well for the future of RIG.

And while new exploration projects obviously provide future revenue potential, there are also a lot of new rigs scheduled to come on line in the coming quarters. Investors will want to be wary that oil prices and margins could remain under pressure. Luckily, RIG does have a premium positioning in the market…

For example, RIG has a backlog of orders, and a lot of them are in the ultra-deep segment where the company is already at 100% utilization and continuing to invest heavily. It’s nice to see RIG with such a strong grasp on this important segment of the oil discovery market as it infers something of a competitive advantage.

However a final red flag investors will want to be wary of is the shortcomings of management in the past couple of years. While activist investor Carl Icahn has announced a 5%+ stake in RIG, replaced the CEO and got a couple of seats on the board, RIG is still a big ship that will take awhile to turn around. The company has been improving efficiency and looks to be on track. But investors may need a few months of patience before seeing meaningful capital appreciation.

Speaking of patience: When analyzing companies for longer-term investment, it pays to look at how the price action relates to the fundamentals. So let’s take a look at RIG stock charts on a few different time frames..,

RIG Technical Analysis Long Term:

RIG Monthly Jan 2014

Click to enlarge this annotated monthly chart of RIG and see the big picture story of price action

RIG Technical Analysis Medium Term:

RIG Monthly Jan 2014

Click to enlarge this weekly chart of RIG to see the controlling technical price pattern

RIG Technical Analysis Short Term:

RIG Daily Chart Jan 2014

Click to enlarge this daily chart of RIG for short term technical analysis.

RIG Analysis Conclusion:

So there you have it. RIG would probably be a safe bet to add to a long term portfolio. I would personally wait for the recent selling to stabilize before dipping a toe. But if you’re in it for the long term this doesn’t seem like a bad price to own some Transocean. While RIG looks tempting management’s ability to deal with oversupply issues or CapEx challenges remain discounted by the market. For those reasons, I think I’ve found another similar idea I like even more. But I’m going to keep that one for premium subscribers.

But If You’re Still Curious:  You might be interested in signing up for the free email analysis and updates below. You’ll get exclusive access to my free mini-ebook that explains how I consistently cash in capital gains using a combination of swing trading and value investing.

Tips For How to Trade Penny Stocks

how do you trade penny stocks

Without some guidance, learning how to trade penny stocks can be a real maze

How Do You Trade Penny Stocks? In one word: Carefully! Learning how to trade penny stocks can be an expensive process if you’re not very very careful. So to help you speed up your learning curve I’ve assembled a number of resources to help you navigate the online penny stock trading minefield.

By the time you finish reading this blog you will be well on your way to learning what to watch out for in the world of penny stock trading. Of course profitably trading penny stocks will take some practice. And whenever you’re trying out new investment strategies I always recommend you try out a good stock simulator before putting real money on the line.

If you want to skip-ahead, you can also try outsourcing your penny stock ideas through a premium service like The Penny Stock Egghead.

Now let’s get into it the best tips for how to trade penny stocks yourself.

Free Resources For How To Trade Penny Stocks:

How To Find the Best Penny Stock to Buy: This blog post gives you a good overview of what to look for in strong penny stocks. You want to look out for both fundamental and technical patterns that can signal true strength in a penny stock, rather than just a short term pump job. Speaking of which…

How to Spot Penny Stock Scams: By no means is this a definitive guide. But you can pretty quickly learn the most common penny stock scams and how to avoid them. The good thing about penny stock scams is many of them happen the same way. So watch out for these common clues and you’re one step closer to avoiding the worst penny stock scams of all.

How To Find Penny Stocks Breaking Out: A lot of traders like penny stocks is because of their explosive percentage moves. This blog post shares my favourite stock screen for finding penny stocks that are breaking out. I’m a pretty conservative investor but this stock screen has provided me lots of great stock ideas.

Best Penny Stock Trading Videos Online: If you’re looking for more penny stock trading screens then check out these video. There are a number of different ways to approach penny stock trading and in these videos I show you some of the best tricks and tools I use to find penny stock trading opportunities.

Popular Penny Stock Products and Services in 2014: Some readers have been asking me about penny stock products and services in 2014, so I did some research. I have not tried these, so be careful with them (remember what I said about scams?). They might be good sources for ideas every once in awhile, but just be careful.

How Do You Trade Penny Stocks?

Now that I’ve shared some of my tactics for trading penny stocks, I want to hear from you. Do you have a successful approach to penny stock trading? I’d love to hear from you in the comments below!

And By The Way: If you’re looking to learn even more about how to find and analyze stock ideas, I encourage you to fill out the form below. You’ll get free access to my mini-ebook and exclusive emails on how you can find good stock ideas.

Weekly Stock Charts: Zoom Out

weekly stock charts

Zoom out and get some perspective on your stock trading with weekly stock charts.

Weekly Stock Charts provide a ton of valuable perspective. This is especially true when the stock market sells off and it feels like you might lose your shirt. The minute to minute machinations of Mr. Market can drive you crazy. So I like to use weekly stock charts to zoom out when times get tough.

Weekly stock charts are a great way to pull your head out of the trenches. And when you zoom out with the weekly view, you’ll usually find things don’t look so bad. Plus, a lot of institutional money managers with huge asset bases key off weekly charts in the first place. So you know weekly stock charts are relevant even if you’re a short-term focused swing trader.

Now let me show you some examples of how I use weekly stock charts…

Weekly Stock Charts Reveal Controlling Technical Pattern

Weekly stock charts are a great way to judge the controlling technical pattern in a stock price. By zooming out and focusing on the weekly chart you can see if your stock is consolidating, topping, or trending ever higher. The long term view provided by the zoomed-out weekly stock chart can be exactly what you need to be reminded of the big technical picture influencing the price pattern of your stocks.

And to be honest…

Sometimes when you’re looking at 5-minute, 30-minute or daily stock charts, it’s easy to get overwhelmed. The stock patterns happening in real time feel like they’re the only thing that matter. But when you take a step back and look at the weekly chart you’ll get valuable context of how the day-to-day price action fits into the larger story of price performance. When you zoom out to the weekly stock chart it will often give a clue as to which price patterns are influencing the shorter-term moves in the stock market. Make sense?

Here’s a super simple example of weekly stock charts showing the dominant trend…

Weekly Chart Reveals Controlling Technical Pattern

Even though SPY is selling off, the weekly chart reveals a firm uptrend is strongly in control

Weekly Stock Charts: Sustainable Turning Points:

Weekly stock charts aren’t just about finding the controlling technical patterns They’re even more actionable that that because weekly stock charts are a great way to find stock market bottoms. Since coming out of a downtrend can be a very bumpy process for most stocks, I like to use the weekly chart to look for a higher low. By zooming out and focusing on the weekly stock chart, I’m able to avoid a lot of the “backing and filling” that makes bottoming such a choppy process for most stock prices. But that’s not the only benefit.

By zooming out and looking for a trend change on the weekly time frame, I also avoid tying up my money prematurely. The weekly chart can help you jump in to bottoms only once they are making meaningful turnarounds (without yet becoming over-valued). Using the weekly stock chart is a great way to avoid putting your money at risk too early.

Keeping an eye on the weekly stock chart is a great way to avoid rushing in too soon and can help you find higher probability entry points. So while I find it very helpful to use weekly stock charts to isolate the controlling technical pattern, finding durable bottoms is the most actionable use I have for weekly stock charts.

So now that you know the value of weekly stock charts, here’s where you can make your own…

Best Source for Weekly Stock Charts:

Luckily finding weekly stock charts on the internet are easy to find. As always, I recommend freestockcharts.com for all of your charting needs. It’s the most robust tool and allows you to look at stock on weekly, monthly and quarterly time frames. This should be enough to get you sufficiently zoomed out!

Additionally, if you’re looking for a lot of advanced technical indicators and analysis, I recommend you check out stockcharts.com. They have a good interface for overlying technical analysis tools, a lot of which are even more meaningful on these longer weekly time frames.  Check out this short blog post to learn more about both of these stock chart websites if you’re not already familiar.

So I hope learning how I use weekly stock charts has helped you understand another layer of analysis that goes into the risk management, trading plan and emotional control involved with successfully trading your stock ideas.

And by The Way: If you want to learn more exclusive techniques for managing your trading risk and improving your stock market returns then sign up using the email form below. You’ll get ideas and analysis right to your email inbox, that you won’t see anywhere else. Sound good?

Investing Money to Make Profit

investing money to make a profit

Who do you invest money to make a profit, without getting hurt?

Investing Money to Make Profit is what StockIdeas.org is all about. And while there are a number of ways to invest money to make a profit, we’ll focus in on the most actionable ideas in this blog post. You see…

Investing money to make profit is the only sustainable way to invest. While day trading, macro-economic analysis and market-watching can be fun, if you’re not consistently making profits in the markets then you have no business managing your own money. Even if you’re still learning, you might be better off practicing how to make profits from investing using a stock simulator, before putting your real money on the line. I’m sorry if that sounds harsh. But this is the real deal so you want to focus on profits!

Now let’s look at the most common ways to make profit investing in the stock market…

Building Assets: The Classic Approach to Investing Money to Make Profit

Investing money to make a profit sounds like a great goal. But it’s a little tricker than you might think. Traditional financial advisor wisdom will tell you to buy and hold a diversified basket of assets. Over time, proactively building your asset base by regularly investing will lead to long term profits. Now I’m not saying focusing on long term profits is bad advice. But…

If you’re reading Stockideas.org you’re probably a little more interested in actively making money in the markets right now. And I don’t blame you. Extracting regular profits from the stock market is fun. And as I show in my mini-ebook (available free on right side of page) swing trading can be complimentary to a longer term focus on building wealth through asset accumulation. So how does that work exactly?

Capital Gains: My Favourite Way to Invest Money to Make Profits:

When investing money to make profit, of course you want to focus on long term wealth. That should go without saying.  But is there a way you can invest money for the long term, and make a profit in the short term? I contend that yes, there is…

While I’m basically a long term fundamental investor who looks for a margin of safety in my investments, I also use swing trading techniques to regularly extract profits from my investments in the stock market. This is how I actively compound my investment gains. Curious?Let me explain.

I can regularly make profits from investing because I accept the market is irrational in the short term. When my core long-term holdings go up 5% or more in a day or two, I often sell a little bit for a capital gain (profit) because I know the stock will probably come back down a couple of percentage points. By focusing on managing my long term positions in a short term timeframe I am able to invest money to make a profit. It’s actually easier than you think. And if you’re curious to learn more you should read this swing trading example strategy that shows how I apply this idea. I also share these examples in real time with my premium stock idea subscribers.

You see…

Once you accept the day to day fluctuations in stock price often have little to do with the long term fundamentals of the company, you can regularly extract capital gains from the stock market by swing trading. This is by far my favourite way to invest money to make profits. But if you’re not inclined to try swing trading out, there is another way to make profits from investing money the stock market..

Dividends: A Reliable Strategy for Making Investment Profit…

Dividends are a great way to profit from investing money in the stock market. That’s because not only are dividends predictable, but you can always reinvest them to get even more dividends in the future. Dividends can eventually snowball your profit. And while you would need a 7 figure amount of money if you wanted to live exclusively off dividends, you can still regularly make profits by buying dividend stocks.

Dividends are a nice way to add some investment income into your stock portfolio. And it can be really comforting to know that you’re going to get a cheque every quarter from your portfolio companies. Of course as with any investment, there is a risk when chasing dividend yield, and companies do sometimes cut their dividend. But for the most part this is a pretty reliable way to make profits from investing your money. So…

If you’re interested in learning more about making profits from dividends, then I encourage you to read this short article about finding the best high-dividend yield stock ideas. As I said, dividend investing has a lot of value and can be a very consistent way to get profits from the money you invest in the stock market. And at the end of the day, that’s what your trading and investing strategy should be about. I mean…

While it’s fun to talk about the markets with your friends and colleagues, make sure you remain focused on your P&L. Because if you don’t make profits you won’ be able to keep investing!

And By The Way: If you’re curious to learn more about how to regularly extract capital gains from the stock market, I encourage you to sign up below using the form on this web page. You’ll get interesting behind-the-scenes insight into how I approach the markets to profit from my investments…