Monthly Archives: January 2014

Documentaries About The Financial System

best financial system documentaries

Read this blog post to see the best documentaries about the financial system…

Documentaries About The Financial System provide eye opening insight to traders and investors alike. Learning about the inner workings of the financial system can really help you take advantage of the stock market ecosystem you operate in. So what are the best documentaries about the financial system?

Well, I’ve spent hours upon hours watching documentaries about the financial system. And I’m happy to share some of my favourites below. Where possible, I’ll link you to free YouTube videos. But it’s worth noting there are also a lot of great finance documentaries on Netflix as well. So let’s get into it…

Best Documentaries About the Financial System:

The Ascent of Money: Niall Ferguson is an incredibly talented financial writer. And the documentary version of his famous book “The Ascent of Money” is enlightening and eye-opening. Learning how money came to be, as well as the important role it has played in history, is incredibly interesting. You’ll be amazed at how money, and those who learned to control it, bestowed immense power. The Ascent of Money is a complete history of the financial system that is separated into 5 segments each about an hour in length. You can check The Ascent of Money out (in it’s entirety) for free on YouTube by clicking the link above.

Super Rich: The Greed Game: This documentary takes a look at those who have risen to the top of the financial system. You’ll see how these big spenders made it to the top of their fields, and what it takes to stay on top.  While this documentary exclusively about how the financial system works, it offers a cold hard look at what absolute financial success requires.

Wall Street Warriors: Some people might say this documentary is a little cheesy. But I really enjoyed this day-in-the-life series that shows all kinds of different Wall Street personalities. If you’re considering working in finance you’ll love this documentary-style TV show that takes an inside look at the different career paths available on Wall street. It’s a great financial documentary series worth checking out. Plus you get to see Tim Sykes botch a date with a hot girl.

Overdose: The Next Financial Crisis: This documentary about the financial system takes a hard and objective look at what caused the financial crisis of 2008. But more than that, Overdose goes on to show what our addiction to credit means and why we aren’t out of the woods yet. So watch this financial system documentary to learn why an even bigger credit crises might be lurking around the corner.

To Catch a Trader: This PBS Frontline documentary takes a look at the insider trading scandal that rocked Steven Cohen’s SAC capital. It’s an eye-opening look at what happens inside the financial system and how some of the biggest guns on Wall Street skirt regulators to put your money in their pockets. Frontline has great production value, so huddle up and study how insiders get their (illegal) edge.

Hank – Five Years From the Brink:  This financial system documentary is an in-depth series of interviews with Hank Paulson. The documentary takes place 5 years after Hank Paulson steered the US government through the financial crisis in his role as Treasury Secretary. Learn how the decisions around “too big to fail” actually came to be, and why this unprecedented financial intervention was such a big deal. While I’ve linked to the trailer above, I think this financial system documentary is only available on Netflix.

Fiat Empire: This documentary about the financial system does a good job of explaining the role of the Federal Reserve. While almost everyone in finance has an opinion on the Federal Reserve, this financial documentary does a good job touching on the conspiracy theories while still illustrating how the Fed works. And the Fed’s huge role in the financial system should be of major importance if you’re actively investing in stock ideas.

So there you have it. I hope you enjoy these documentaries about the financial system. There are hundreds of other finance documentaries on YouTube you can watch for free. I’ve watched a ton of these financial system films and while there are lots of great Wall Street documentaries, the ones above are the best, in my humble opinion. If you have a favourite documentary about the financial system, please let me know in the comments below!

And By the Way: If you want to learn more about how to take advantage of the financial system, and improve your own trading you can sign up for the free email updates below. I’l send you analysis and stock ideas you won’t find anywhere else!

What Makes a Good Investment Club?

what makes a good investment club

What are you looking for in a good investment club?

What Makes a Good Investment Club? It’s a great question, because a good investment club can really help you improve your stock market trading strategy. And the good news is, finding out what makes a good investment club is easier than you think.

So in this short blog post we’ll look at what makes a good investment club and how you can avoid common investing club mistakes. While I haven’t joined an investment club myself, I’ve done some investing with friends. So, I know what it’s like to make investment decisions by committee. And I’m happy to share my experience to help you navigate the pros and cons of investment clubs yourself.

The One Thing That’s Absolutely Necessary For a Good Investment Club:

The one thing you absolutely must consider to find a good investment club, is finding an investment club that works for you. This might sound silly, but I’m really serious. Before finding a good investment club, you need to know how you like to invest. I mean sure…

You’re probably interested in finding out what makes a good investment club because you want to learn  from other investors. And while you can certainly learn a lot from the right investing club, you need to be honest with yourself. You need to know yourself as an investor and what you want to get out of the experience. Let me tell you what I mean.

If you’re interested in chasing new IPO’s, an investment club that focuses on dividend investing won’t be a good fit. You’ll get frustrated. And you won’t learn what you were hoping for. So the most important factor that makes a good investment club is finding a club that fits your investing and trading style. Make sense, right?

Important Questions To Find a Good Investment Club:

When you’re trying to learn what makes a good investment club, there are a lot of things besides a similar investing approach you should ask about. And the good news is, the investing club you’re considering will always want to interview you as well. So you’ll have plenty of chance to get answers to these important investing club questions…

  • What the investing club time frame? Whenever you commit with people you want to know what their time frame is. This is true with investing as much as it is with dating. Can you pull your money out whenever you want? Or is it locked up for a few years? You want to make sure the investing club time frame lines up well with your life!
  • What’s the expectation for investor involvement? Good investment clubs generally require some type of investor involvement. Is it monthly meetings? Or are there more regular requirements? Some investing clubs might have tiered levels of involvement, so learn the different ways you can contribute and what the group is looking for. Maybe you can even bring a unique angle to the group based on your professional experience or industry.
  • What’s the capital contribution? If you want to invest, you need to have money to invest, right? You should find out what the minimum and maximum capital contributions are.  Some clubs might require you to bring a certain amount of money to the table. And even if you have the money, do you want to invest 70% of your net worth in a club with others? Think wisely about the capital contributions your investment club requires.
  • What’s the regular contribution? Investment clubs may expect you to invest money every month. You want to be sure you aren’t stretching to meet the need. Communicate clearly and don’t bite off more than you can chew. A good investing club should be a fun and profitable learning experience.
  • What’s the investment decision making strategy? I’m not talking about the investing approach. I’m talking about understanding how the investing club come to consensus. You want to know how investing decisions are made so you can get a glimpse into how much of a say you will have in the club. For some people this is more of a sticking point than others.

Hopefully these questions will help you figure out what makes a good investment club for you. Of course there’s always more due diligence to do and you should meet the people in the group and decide for yourself if it’s a good investing club for you. And if you’re still interested in investing with others, check out these resources below…

Tools To Help You Find a Good Investment Club:

If you want to find a good investment club, there are lots of great resources to get you started. Below are resources for finding and starting investment clubs in almost every country in the world! I’ve also listed investment club associations for Canada, US and UK.

So here’s where you can get started finding a good investment club…

Now let me know what you think. What’s your opinion on what makes a good investing club? Do you have any experience investing in clubs? Leave a note on what you think makes a good investment club in the comments below…

And By The Way: If you’re looking for more ideas to help you improve your investing strategies, feel free to sign up for the email updates below. You’ll get exclusive stock ideas and analysis you won’t find anywhere else.

Benjamin Graham’s Theory

benjamin-graham-theory

Learn why Benjamin Graham’s Theory is still influencing Wall Street today…

Benjamin Graham’s Theory of Value Investing is a must-know for aspiring investors. Benjamin Graham’s theory changed the way investing was thought about. And even though Ben Graham came up with his theory of value investing over 70 years ago, this investing approach has stood the test of time.

But why all the excitement over value investing?

In case you’re unaware: Benjamin Graham was a professor at Columbia Business School who actually taught Warren Buffett. His books, Security Analysis and The Intelligent Investor are some of the most oft-referenced investing books available and the definitive texts on value investing. No wonder Ben Graham is so revered!

But enough with the pre-amble, how can you use Ben Graham’s theory to help your investing strategy?

What is Benjamin Graham’s Theory?

Benjamin Graham’s investing theory can best be described as Value Investing. The basic premise of value investing is based on the Margin of Safety philosophy, that means you should look for investments that are trading below the intrinsic value of the underlying business. This intrinsic value of the business provides a margin of safety for investors. The margin of safety allows you to treat your investments as if you were buying ownership in privately operated companies and frees you up from worrying about the price offered by Mr. Market (one of Ben Graham’s best allegories). Plus…

Prior to Ben Graham’s investing theory, investors were very speculative in nature, overly concerned with dividends and intensely preferential to bond and fixed-income investing. Ben Graham laid out a strong case for investing in stocks that are trading at a discount to their intrinsic value. One of the great thing’s about Graham’s theory of value investing is that he didn’t just come up with it in a classroom, but he actually practiced value investing at his company Graham-Newman & Co.

Graham’s Theory Goes For a Random Walk:

The Efficient Market Hypothesis (as described in A Random Walk Down Wall Street) is a popular investing theory that is starkly at odds with Graham’s theories on value investing. The efficient market theory explains that all information about stocks is knowable and rationally digested by the markets. On the other hand, value investing proclaims that the market is irrational and there are deals to be had by relying on facts instead of the sentiment of Wall Street speculation.

So how does Benjamin Graham’s theory stand up to the efficient market model?

I think the merit and validity of Ben Graham’s theory of value investing is best described in Warren Buffett’s essay: The SuperInvestors of Graham and Doddsville. This essay is the most compelling argument I’ve ever heard for Benjamin Graham’s theory of investing. And it easily explains why efficient market theorists never make it rich. Pretty cool, right?

But you’re probably wondering…

How Do You Apply Benjamin Graham’s Theory of Value Investing For Yourself?

Learning to apply Benjamin Graham’s theory of value investing marked a turning point in my investing career. Graham provided the framework to think about investing in rational and logical manner that really resonated with me. Now at the risk of sounding obvious…

The first step to applying Benjamin Graham’s theory is to learn it! I suggest you read The Intelligent Investor if you haven’t already. It’s a great introductory read to the world of value investing and provides a ton of timeless information to get you on your way. I’ve done an in-depth book review of Ben Graham’s famous book, so click the link above to learn more about this amazing value investing book by Ben Graham.

If you want to take value investing a step further, you can read Ben Graham’s Security Analysis. This book is a textbook-level discussion about value investing and is the surest way to dive into Ben Graham’s teachings. Just keep in mind this book is a little dry so you might want to have some coffee brewing for when you read it.

And finally…

If you’re looking to apply Benjamin Graham’s theory of value investing for yourself, you’ll want to practice value investing! If you’re new to investing you should start using a mock stock trading simulation. Get accustomed to finding what value investing opportunities look like. And of course keep studying the books of other great value investors like Warren Buffett, Joel Greenblatt and Whitney Tilson. If you’re curious about where to start, watch the video below to find a free stock screen based in Benjamin Graham’s theory of investing…

Benjamin Graham Theory Stock Screening Criteria [VIDEO]:

As with anything, applying Benjamin Graham’s theory for yourself requires practice, patience and discipline. Keep your position sizes small when you’re starting out so you can live to invest another day.

And By The Way: If you’re looking for more information on how to apply value investing techniques like Benjamin Graham taught, then sign up for my free email newsletter below. You’ll see how these time tested techniques can be used by swing traders and long term investors alike!

A Golden Stock Tip For 2014?

golden stock tip 2014

Is 2014 really going to be such a bad year for Mr. Gold?

Are you looking for a Golden Stock Tip in 2014? If so, you’ve come to the right place. This golden stock tip for 2014 is exactly what you’re looking for.

So what is this golden stock tip exactly?

My golden stock tip for 2014 is a stock idea I’ve shared before. You’ll see I mentioned it in my December 2013 stock ideas, and again in January. But while I was hesitant to wholeheartedly recommend this golden stock tip, it now looks like there’s a possible catalyst on the horizon.

Could 2014 be the year of the golden stock tip? Keep reading to find out if any of the gold picks below are right for you in 2014…

Technical Analysis of Golden Stock Tip:

Before getting into specific golden stock tips for 2014, I want to provide a little technical backdrop to these ideas. This way you’ll have better context into my perceived risk/reward. But admittedly…

Other people have done technical analysis on gold stock trading ideas. And they’re saying it better than I could. So check out this article about the bullish RSI divergence in the gold miners. It provides a very interesting perspective. And this indicates momentum might be shifting in favor of the bulls.

Aside from the relative strength, you can see in the post above that the price action of the gold miners is slowly improving. Going into 2014, gold buyers have had much more success than the year prior. Of course it’s still early to call a bottom. And maybe this is just another trap to lure in eager bullion bears. But hey…

I promised you there might be a catalyst for the golden stock tip of 2014. So let’s take a look…

Fundamental Golden Stock Tip Potential:

The reason 2014 might be the year for the golden stock pick isn’t just because of the improving technical price action in gold mining stocks. There are actually a couple of potential influences that could positively influence the price of gold in 2014. So what are these catalysts for the change in gold price?

Asian demand for gold is steady. Rumor has it the Chinese government is looking to find other places than USD denominated treasuries to put their money.  So they are reaching for gold and other hard assets. This demand for physical gold (in exchange to paper claims to gold) might eventually start to materially impact gold prices. But there’s an even bigger possible catalyst on the horizon…

While blogs like Zerohedge have been documenting the rehypothecation of gold for awhile, the manipulation of gold prices is moving into the mainstream media. Plus Deutsche Bank exited the gold price fixing, after regulators started to clamp down. If that’s not enough…

Paul Craig Roberts wrote a very compelling step by step look at the “How’s and Why’s of Gold Price Manipulation.” He’s a credible source and this article is definitely worth reading to wrap your head around the size and scale of what’s happening in the global gold markets. So…

Given the ongoing QE, the apparent manipulation of gold prices and robust Asian demand for gold, the technical price action in gold thus far in 2014 could be worth watching, in case it morphs into a sustainable rally higher.

Now that we’ve got the big picture of the 2014 gold market, let’s take a loop at some specific golden stock picks…

Golden Stock Ideas for 2014?

Barrick Gold (ABX) is a major gold producer. It’s a big company with a $24B market cap. If you’re a long term value invsetor, you’ll be interested to know the stock had a horrible year in 2013. Not only did the price of Barrick get hammered, the stock also had a lot of bad news is priced in. But the company has disciplined operations so if you’re looking for the best in breed gold miner this could be a profitable stock pick for 2014.

Iamgold (IAG) – (my personal golden stock idea for 2014) is a smaller Canadian gold miner that’s weathering the storm in declining gold prices quite well. It’s always nice to see a disciplined and capital conscious management, which is definitely the case for IAG. Another smaller gold miner that looks good is NGD. But I don’t know too much about it so you’ll want to do more of your own research. These guys are still in overall down-trends though so keep positions small and don’t hesitate to cut losses.

If you just want broad exposure to the gold industry in 2014, then maybe an ETF is what you need. GLD, GDX and GDXJ are also an easy way to trade and own gold stocks in 2014. GLD gives you a claim to gold, while GDX and GDXJ give you exposure to gold miners and junior miners respectively. With these equity instruments you can cash in on this golden stock tip for yourself going into 2014.

And By The Way: If you’re looking for more information on new stock ideas and investments themes in 2014, I encourage you to sign up for the free email newsletter below. You’ll get all kinds of ideas unavailable anywhere else online.

Trading by Following Resistance and Support Trendlines

trading by following resistance and support trendlines

You really think you can trade without (trendline) support?

Trading by Following Resistance and Support Trendlines is a common strategy. But does it really work? In this short blog post you’ll learn the most important aspects of trendline trading to keep in mind. And…

By the end of it you should have a strong grasp on how to trade by following resistance and support trendlines for yourself. So whether you’re a short term day trader or a long-term investor you’ll see how following trendlines can help you improve your trading.

So let’s get down to it:

Trading Trendline Support and Resistance Must-Do’s:

Following resistance and support trendlines can help improve your trading. But if you want to do it right, there are a couple of trading tactics you should keep in mind. So here are some of the most important basics to remember when trading by following resistance and support trendlines…

Draw The Right Trendline: This sounds obvious. A trendline is a straight line that connects two or more price points. Lines can trend up, down or horizontally. But a lot of traders and investors who are new to technical analysis don’t properly draw trendlines. The main thing to keep in mind is that you should draw trendlines that touch price as little as possible. Read this tutorial on trend lines from stockcharts.com to up to speed on best practice.

Evaluate Trend Strength: If you’re looking to buy trendline support and sell at resistance, you’ll want to understand how strong the trend is. You can judge the strength of the trend by using technical analysis indicators, such as moving averages. If you’re going to be using trendlines to guide your buying and selling make sure you assess the strength of the trend before putting your money to work.

Manage Your Risk: If you buy the support trendline, you want to be careful. While a strong trend will usually keep persisting, you don’t want to bet your entire brokerage account on it… because eventually… trends reverse.  So if you’re buy the dip by following support trendlines (and selling into resistance) you want to be sure to use a stop-loss. Keep your losses on your position to about 7 or 8% to make sure you can live to trade another day. And pay careful attention to your fundamental thesis if your stocks start to get extended. While trading by following resistance and support trendlines can be quite reliable, just be careful to limit your risk.

Don’t Get Too Picky With Price: If you’re watching a trendline for support or resistance, you’re probably not the only one. It pays to remember there are thousands of other traders and high frequency trading algorithms that are trying to out-position you. Don’t get too cute with limit orders and exact prices or you might get left holding the bag. When you have conviction in your trade idea sometimes you’re better off to use market orders and not worry too much about the exact trendline support or resistance number. Make sense?

Know Your Time Frame: Successful investors and traders are always aware of their time frame; whereas, beginning traders often get shaken out because they forget the bigger picture.  Being aware of your time frame is even more important when you’re trading by following trendlines. It can be emotionally exciting when your short term trendlines are holding. But if you’re battling against a conflicting trend on a weekly or monthly timeframe then you’re living on borrowed time. Ideally, when you’re trading by following resistance and support trendlines the intra-day, daily and weekly trendlines all line up.

Top Down Trading:  Just like you want your trends to align across time frames, it also pays to watch what the stock market is doing from a “top down” perspective (as described in Jessie Livermore’s How to Trade in Stocks). For example, for the last few months I have been buying SNV, a small regional bank. I have a bit more faith in SNV’s uptrend because the regional bank ETF (KRE) is also in an uptrend. Plus, the financials as a whole are in an uptrend (XLF) and the stock market overall is an uptrend (SPY). When your stock trends align with the trendlines of the rest of the industry, sector and market you can have more faith in trading by following resistance and support trendlines. Logical enough, right?

Now that you’ve learned some of the important factors influening how to trade by following support and resistance trendlines do you have any other questions? Feel free to leave your own trendline trading tactics in the comments below.

And By The Way: If you’re looking for more trading indicators and signals that work for swing trading, then sign up using the email form below. You’ll get my free mini e-book full of trading strategies and approaches to stock market profit.

Volume vs Price Analysis Explained

Price vs volume analysis explained

How do you analyze the price of volume? Read this post to learn how…

Volume vs Price Analysis is a very powerful tool for stock traders and investors. But Price by Volume analysis isn’t often talked about. So in this short blog post we’ll pull back the curtain on volume vs price analysis.

That means:

You’ll learn how price by volume analysis works and how you can use volume vs price yourself to make investing and trading decisions. By the end of this post you should have a clear concept of how to use volume vs price as a technical analysis indicator

So let’s get into it…

Volume vs. Price Analysis – Supply and Demand Visualized:

Volume vs price analysis (or price by volume analysis) is basically just a way to show the trading volume at a given price. Why is this so special? Well…

Most traders and investors look at the daily average volume to get an idea for how liquid a stock is. This can definitely help you avoid risky stocks that might turn illiquid when the hype runs out. And it can help you understand the conviction of a price move. But looking at volume on a given trading day, week or month only shows you half the picture. On the other hand…

Using volume vs price analysis shows the exact prices at which buys and sellers are willing to exert themselves. By looking at the price by volume profile of a stock you can easily see the historical price sellers while. While the price by volume profile generally corresponds roughly with support and resistance levels, the parallels are not always exact. That’s why volume vs. price analysis can add an important layer in helping you determine your buying and selling points.

So what does volume vs price analysis actually look like?

Instead of being depicted by vertical bars under the chart, price by volume is seen on charts as a series of horizontal bars stacked on top of each other. At first, volume vs. price analysis looks a little complicated. But take a look at the charts below and you’ll quickly get the hang of it…

Examples of Volume vs Price Analysis:

If you want to see what volume vs price analysis looks like in practice, just take a second to browse the charts below. These will show you how I use volume by price analysis to analyze my stock ideas.  This volume vs price profile is incredibly helpful in figuring out swing trading buy and sell points. So read the yellow notes in the annotated chart below to see what volume vs price analysis looks like and how I use it to look for trading wins.

SYA Volume Vs. Price Analysis:

SYA price vs volume analysis example explained

SYA might be breaking out of a high volume price area… (Click to enlarge)

REGI Volume Vs. Price Analysis:

SYA price vs volume analysis example explained

REGI has plenty of resistance above, and is on the verge of slicing lower through a low volume pocket. Be careful with this one! (Click to enlarge)

NTWK Price by Volume Analysis:

NTWK Price vs volume anlaysis explained

NTWK might be about to breakout and up through a low volume pocket. This could be a quick move higher (Click to enlarge).

One More Tip For Volume vs Price Analysis:

If you’re interested in using volume vs price analysis to improve your trading and investing results, there’s one more tip you should keep in mind. So here’s what you need to know:

When you’re using volume by price analysis you should always defer to the larger time frame. Just be conscious that if you’re looking at a 5-minute intraday chart, the influence of the price by volume profile isn’t going to be as strong as the daily or weekly chart. Make sense? Now let me ask you…

Have you used price by volume analysis before? And if not do you think it’s something you can incorporate further into your investment or trading strategy? Let me know in the comments below.

And By The Way: If you’re interested in learning more investing strategies and trading tips, feel free to sign up with your email below. You’ll get a complimentary mini e-book that explains more about how I use swing trading and value investing to maximize my returns…

What Makes A Risky Stock?

what makes a stock risky

What risks are lurking behind your stocks?

What Makes A Risky Stock? It’s a good question. And getting to the bottom of what makes stocks risky can save you a ton of money. So what should you be on the lookout for when you’re trying to find stocks to buy?

In this short article you’ll learn to spot the major red flags that define risky stocks. With this knowledge you’ll be well on your way to improving your confidence in your stock picks and protecting your bottom line. Sound good? Great. So…

In no particular order here are…

Factors That Make A Stock Risky:

Really Low Volume: Volume is like a proxy for stock demand. It gives you an idea of how many people are interested in buying and selling the stock in question. Practically speaking: If there are less than 150,000 shares traded you will have trouble getting in and out of a stock. This is particularly problematic if you have a large position because you won’t be able to sell your stock without driving the price down. This is how a lot of penny stock scams happen. To be safe, look for stocks with an average of over 500,000 shares traded daily.

Micro Market Cap: This isn’t a deal breaker for risk. But you should know that stocks with really low market caps (under $300 million give or take) have a tendency of being volatile. They’re also usually low priced stocks, so you can suffer big % gains which look terrible on paper and will turn your stomach in knots. While low market cap stocks are often under-watched and may very-well be mispriced, this can be a bumpy road to ride. So be prepared.

High Price to Earnings: While some growth stocks warrant their high price to earnings multiples, most of the time this is a sign of risky hype. And when hype runs out you can be left holding the bag. The risk with overpaying for earnings is that if the expectations aren’t met the stock will collapse and there are no hard assets to prop up the value. It can be a long way to fall. To avoid risk I ideally I look for stocks with P/E ratios under 15, and I almost never buy stocks with P/Es over 30.

Negative Operating and Free Cash Flow: Sometimes companies have negative free cash flow because they are making big investments to support growth. But companies that have negative operating cash flow and consistent negative free cash flow can be very risky investments. While it’s tempting to bet on turnaround stories, it is also risky. The risk of a company running out of cash (and having to raise debt or dilute current shareholders) is very real.  Free cash flow is a great measure because it’s much harder to manipulate than earnings.

High Price To Book Value: The price-to-book value of a company gives you (rough) insight into the intrinsic worth of the company. If a company is trading much much higher than the assets of the company are worth, it’s risky. On the other hand, the margin of safety philosophy is designed explicitly to find stocks trading below book value, precisely because it’s less risky. While book value isn’t a perfect metric it definitely helps to know your stock price is supported by real assets.

Low Current Ratio: One of the risks companies face is solvency. And while keeping an eye on cash flow is one way to avoid the risk of a cash crunch, current ratio is another easy way to get an idea of the risk a company won’t meet it’s liabilities. Stocks with a current ratio above 2 are a much less risky than those laden with current liabilities (indicated by a current ratio below 1).

If you want a more in-depth look at how to avoid these risky stock characteristics, check out the short video below about “what makes a stock risky.”

What Makes a Stock Risky [VIDEO]:

Watch Out For Risky Stocks:

As you can see, there are a number of factors that make a stock risky. And the risks to investors aren’t always easy to see. But by keeping your eyes on the indicators above you can get a pretty good measure of risk in your stock ideas.

And By The Way: If you’re looking for more ways to avoid risky stocks, sign up for the free mini e-book below. You’ll learn how I evaluate stocks and use swing trading strategy to reduce risk.

Best Trend Indicators for Technical Analysis

best-trend-indicator-for-technical-analysis

Feeling trendy? Then read to find out which technical analysis indicators are best…

The Best Trend Indicators for Technical Analysis can help you find stocks that are poised to go higher. So what are the best technical analysis trend indicators you can rely on? Well, you’ve come to the right place…

In this short blog post we’ll look at some of the best trend indicators for technical analysis. I’ll show you how I use these trend indicators and how you can use them to improve your trading too. So by the end of this post you should have a strong grasp of which technical analysis indicators can help you find stocks trending higher.

 Technical Analysis of Trends Using Price Action:

One of the best trend indicators for technical analysis is the price action of the stock. I know you might have been looking for something fancier, but the truth is that just looking at the price of the stock can give you a lot of indication as to the current trend. And by definition, technical analysis is concerned first and foremost with the price and volume of a stock. But…

What makes a trend?

Generally speaking, a stock is trending up if it is making higher highs and higher lows. Conversely, stocks are trending down if they’re making lower highs and lower lows. The strength and severity of the trend will also depend on the timeframe. To find the strongest trends you want to find stocks that are trending up on five minute, hourly, daily, weekly and even monthly time frames. The more all of these trends line up across time frames the stronger the trend will be. So by just paying attention to the relative price of peaks and troughs you can usually nail the trend of most stocks.

So how do use this technical analysis of price action to identify trends and profits?

If a stock is trending up across multiple time frames and there are no immediate fundamental headwinds to the company, you can feel relatively confident by trying to “buy the dip” when it comes in to make a higher low. Can you start to picture how that might look and how you can use price action as an indicator for technical analysis trends?

But if you want to go a step further than looking only at the price change of a stock, let’s take a look at the best technical analysis indicator or tool for finding trends

Technical Analysis of Trends Using Moving Averages:

Moving averages are one of the most popular technical analysis indicators or tools. And since they are calculated by using price from the last 10, 20 or 200 days, they are basically just an easy way to visualize the technical price trends described in the paragraphs above. But there’s one thing you should keep in mind.

Most beginning stock traders use moving averages as absolute reference points, rather than technical analysis trend indicators. This is a mistake. Moving averages are not really meant to measure support or resistance levels for a stock. Instead, the important thing to watch is the slope of the moving averages relative to one another. What do I mean by that? Take a look at the chart below…

Best Technical Analysis Indicator for Trends

Aligned 20 day, 50 day, 100 day and 200 day moving averages indicate a strong trend

By looking at the SPY chart above, you can tell that the stock market is in an uptrend. This is especially clear when you consider the slopes of the moving averages relative to one another. If all of the moving averages are lined up nicely as above, that’s indicative that stocks have been trending up consistently for extended periods. On the other hand…

If your stock has a 20 and 50 day moving average that is sloping up, but a 200 day moving average that is still sloping down, then this is indicative of an emerging trend – or a countertrend rally within the context of a strong downtrend. Make sense? Use the moving averages together to get a clear indication based in technical analysis of the strength of the trend.

Now if you want to see the best trend indicators for technical analysis in action, just check out this short technical analysis video below:

Best Trend Indicators for Technical Analysis [VIDEO]:

So while there are more technical trend indicators than you can shake a stick at, I like to keep things simple. In my opinion, the best technical analysis indicator for trends is moving averages because they are a simple visualization of the price action of a stock. Make sense?

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How To Invest $5000 Dollars

how to invest $5000 dollars

Learn how to grow your wealth, even if you only have $5,000 to invest

Do You Know How to Invest $5,000? If not, you’ve come to the right spot. In this short blog post we’ll look at the best way to invest $5,000, and a couple of other important things you need to know about building wealth. And on that note…

Congratulations on saving $5,000! Sure, it’s not a life-changing amount of money or anything. But it’s still impressive you’ve made it a priority to consistently put your money aside. And now you get to share in the benefits. So read this blog post about how to invest $5,000 and learn how you can put your earnings to work for you. It’s an exciting experience. But let’s not get ahead of ourselves.

The Boring Truth: How To Invest $5,000 Dollars:

The best way to know how to invest $5,000 is to experiment and try it yourself. But while some people will try penny stock services and other will read investment books, most folks should just accept the boring truth: Indexing your stocks works pretty well. That means…

You can buy an ETF like the SPY or a low cost indexed mutual fund. These financial products give you access to a tiny sliver of all the stocks in a big index. This is a good way to diversify, avoid financial advisor fees, and build your wealth over time. So here’s what you should keep in mind…

Even though it’s boring to index $5,000, getting 70% returns each year shouldn’t be your focus when you’re learning how to invest $5,000. I know this might sound crazy to you. But hear me out: There’s something much more important than earning high returns when you’re trying to invest $5,000.

The Cold Truth About Investing $5,000 Dollars:

I realize it might have taken you a few months, or even a few years to save up $5,000. And I’m really sorry to have to tell you this… but, $5,000 is just not that much money. It’s getting there. It’s much better than having only $1,000 to invest. But here’s the key factor to keep in mind:

Getting 20% returns of $5,000 gets you $1,000. When you’re starting out building wealth for your lifetime you need to make sure that you are saving as much money as possible. Compound interest, dividends and capital gains all work better when you have more of an asset base to leverage. So while it is really really really great you’re interested in learning how to invest $5,000, the bottom line is that you don’t want to lose what you have. Invest it safely and focus on growing your income.

The reason is…

If you’ve saved $5,000 then it’s pretty easy to save $5,000 again. And since you would need to get a 100% return in investing, chances are you’re better off to earn the next $5,000.  Now when you start to get $15,000, $20,000 or $30,000 dollars your small percentage returns can have a material absolute impact. Do you follow what I’m saying? It’s important to understand growing your capital base and building assets at this stage is even more important than getting good investment returns. But I hear you…

You have $5,000 to invest today and you want to know what to do with it. So, here’s my best advice for investing $5,000…

How To Invest $5,000 Dollars – My Best Advice:

If you need to know how to invest $5,000 dollars and you don’t have an interest in the stock market then you should index your money in a low cost mutual fund. That’s pretty standard advice. You can learn more about it by reading a short book like the MoneySense Guide to the Perfect Portfolio and then never worry again. But…

If you are passionately interested in the stock market my best advice would be to index half or three quarters of your $5,000 (remember, you don’t want to blow all your savings). And then you can go ahead and invest the rest in your own ideas. Get used to buying stock and working with limit order. Study your craft, read lots of investing books and maybe even open a stock simulation game to improve your edge. You can also trade with eToro to get a piece of the action without much money. But only use a portion of your money this way. The bottom line is…

Learning how to invest $5,000 can help you lay the foundation for a very rich life. And that’s the way you should look at it too. Learning how to invest $5,000 dollars is just the beginning of your wealth building journey. So pick the route that works for you and keep investing a bit of your money each month. Make sense?

And By The Way: If you’re looking for more exclusive stock ideas and analysis you’re welcome to sign up using the form below. You’ll get more information on my approach to stock picking and other valuable resources.

Stocks Ranked by Volatility

stocks ranked by volatility

Learn to find stocks ranked by volatility… and what that means for your portfolio…

Stocks Ranked by Volatility can present interesting trading opportunities. So in this blog post we’ll look at two of the most common measures of volatility that can be of use to stock traders. Then you should be well-prepared to find stocks ranked by volatility (and the trading opportunities that follow). Sound good?

And in case you’re unsure…

Volatility in stocks is basically a measure of how much their prices change over time. There are a number of things that influence the volatility of a stock. But the take home point for investors is that volatile stocks can be emotionally difficult to bear because of the large price swings that ensue. On the other hand, shorter term traders often look for volatility to try and make profit around these large moves. Now I assume if you’re looking for stocks ranked by volatility it’s this profit opportunity that you’re interested in, so that’s what we’ll look at next…

Relative Volatility – Stocks Ranked by Beta:

The most common way to ranks stocks by volatility is using the Beta. Beta is a measure of how much a given stock moves relative to a benchmark, like the S&P-500. Easy enough, right?  So let’s look at some specifics of using Beta to rank stocks by volatility…

If you’re ranking stocks by volatility then you should know that a Beta of 1.0 means the stock moves with the same volatility as the benchmarked index. A Beta above 1 indicates that the stock is more volatile whereas a Beta value between 1 and 0 indicates the stock is less volatile than the index. A negative Beta indicates an inverse correlation to the index. Got it?

Now here’s a list of the highest Beta Stocks. The Finviz stock screener is great for ranking stocks by Beta. You can save that screen yourself or alter it to rank stocks by volatility, based on your own goals and risk profiles. But hey…

Beta isn’t the only way to rank stocks by volatility. Because since volatility is a measure of price change over time, you can just measure how much price has changed over a given time. For instance, here are stocks ranked by volatility of over 15% in a month. Cool right? And again…

You can change the time and % change to tweak the list of volatile stocks to meet your goals (which might be lots of volatility if you’re a trader, or low volatility if you’re an investor). But there’s one more really interesting way to rank stocks by volatility…

Absolute Volatility – Stocks Ranked by Average True Range:

Ranking stocks by volatility doesn’t have to just do with Beta. This is especially true if you’re looking for stocks ranked by absolute volatility (instead of volatility relative to a benchmark). In the case of absolute volatility, I really like to use average true range (ATR). So how do you use ATR?

ATR is basically an exponential moving average that tells you in absolute terms (dollar values) how much a stock has moved over the period the moving average is measured (typically 14 days). So basically the default of ATR (14) measures the volatility of stocks based on the dollar amount of their price fluctuations. You can rank stocks by high ATR volatility so that you can capture big moves of over $3 every couple of weeks. Or…

If you’re a long term investor looking for a more stable portfolio who’s value won’t fluctuate like crazy, then you can rank stocks by low ATR volatility. This way you can rank stocks by volatility to be defensive and protect yourself from big swings in price, rather than just looking for quick trading profits. Make sense?

If you’re still a little confused just click on any of the links above to pull up a Finviz Stock Screener. Then you can play around with the volatility rankings yourself until you find stocks that meet your volatility criteria. Sound good? You can also watch this short video below…

Stocks Ranked by Volatility [VIDEO]:

Now that you know how to find stocks ranked by volatility using screeners like Finviz, how do you think you will use volatility indicators like Beta and ATR to improve your stock trading performance? I’d be curious to hear.

And By The Way: If you’re interested in learning about more neat ways to analyze stock ideas, I encourage you to sign up using the form below. You’ll get free access to exclusive analysis that can help you improve your stock trading strategies. Check it out!