Tag Archives: stock ideas

Trading 52 week highs and lows

Trading 52 Week Highs and 52 Week Lows

Would you rather buy a 52 week high, or a 52 week low?

Stocks trading at these extremes are often in the headlines. But not always for good reasons. And depending on who you ask, you’ll get different answers as to whether you should invest in 52 week lows, or follow the crowd and pile in to 52 week highs.

Before I give you my opinion, here are two places you can find socks trading at 52 week highs and lows:

Personally, I see both sides of the equation. As a value guy, I don’t want to overpay for a company. But I also understand that you can only make money in stocks if they’re going up. And picking bottom is easier said than done.

Ultimately, it’s up to you! So…

What do you think? Would you rather try to pick the bottom, and focus on getting value? Or do you prefer to chase capital gains right now by putting momentum at your back?

I’m not sure that one way is particularly better than the other. It probably depends on your personality.

What style appeals to you?

Trading Education

Trading Education and APIs in the Workplace

For those of you who don’t know, I’m lucky to work a full-time job at a brokerage firm. Questrade: Canada’s fastest growing independent online broker. It’s a lot of fun.

Because…

As part of my role, I get to collaborate with partners across the investing universe. And then I get to write about it. Cool, isn’t it?

#grateful

But get this:

One of the things we’ve done recently is release an API, which partner organizations can connect with in order to facilitate trading, and closer integration with their own trading tools and services.

Here are some of the blogs I’ve written about tools we’ve connected with so far:

And rest assured, there will be more to come soon. So if you have any other ideas of software you ‘d like to see on this list, please do let me know.

But wait.

That’s not all!

One of the other cool things I get to work on is webinars. Nerdy, right? I actually used to own and operate a webinar business. Now it’s just another part of the portfolio. But what a great part, indeed…

Check out our educational trading webinars. There are lots of great topics, from energy market analysis, to options trading and dividend investing, we have all kinds of different insight from trusted educational partners.

Stay tuned for more to come.

 

The Important Matter of Progress

Are you making progress? Or… at least… do you feel like you’re making progress? And how do you even know?

Well, step one is having goals. Or… at least… one goal. Does anything come to mind?

If not, you might be in trouble. You see while I’m sorry to be a wet blanket, the truth is, goals are the reason 3% of Harvard MBAs make 10x as much as everyone else. So I hope you have some goals. Right?

And if we’re being honest…

You’ll notice I said “some” goals. That’s right…

Just like you need a diversified investment portfolio, you need a diverse set of goals. As in the markets, (you guessed it!) diversification offers a free lunch. Be wise and take it.

For example:

If all your goals are focused on work or investing, they will tend to be correlated. And in both those situations there are many variables outside of your control. This is going to give you a very volatile life. Is that really what you want?

What happens if you are a value investor with a goal to earn X%/year returns, but you can’t find any good opportunities no matter how hard you work?

On the other hand:

If you have a fitness goal, a couple work goals, a personal goal and an educational goal like doing an online course, you’ll find you live a much more balanced life. Diverse your goals by time-frame (short term vs. medium and long term) and life area (personal, health, professional, social).

There’s another benefit…

When you live your life this way, your entire existence and self-image won’t be tied to a single thing. Some of you are probably loathe to that idea (aspiring investment bankers come to mind). But I encourage you to be open to the idea.

You see…

Not only is this latter approach to goal setting more fulfilling. But it also makes life more manageable. If you have a bad day at work, you can put it behind you. Instead of dwelling on it, you can move on to  other meaningful things when you get home: like going for a run, or cooking dinner for a family member.

Because that’s what life is about. This is it. You’re living it. Soak it up … and… not just the markets, or work, or taking over the world. That’s just a part of the bigger mosaic of life.

So live it. Push yourself. Experience and achieve.

Even if it’s something small, consistent progress towards your major goals (in all areas of life) is critical. Raise your head resolve to achieve. And take that inaugural step. Because remember, goals were step 1. And step 2, the real focus of this blog post, is getting things done.

 

If you are not familiar: check out Jerry Seinfeld’s productivity secret for some simple inspiration to help you achieve your dreams.

Happy hustling,

Fast Thinking, Losing Streaks and Basketball

It’s that time of year: Playoff sports. NBA edition. Toronto is firmly past the first round, so things are starting to get as exciting here as they’ve ever been. It’s fun (for once) to have an excited city with a reason to stand behind a team. But that’s not what this is about.

Instead…

One of the cool things about basketball is that statistics, chance and the law of large numbers lend themselves so well to this sport. This is on my mind because I’m reading the wonderful book, Thinking Fast and Slow, recommended to me by a YouTube viewer.

Now, as an active investor and trader, I’m always doing my best to think in probabilities. But man, basketball really drives the point home.

Let me give you an example:

In the last Toronto vs. Miami showdown, the two star Raptors players scored 16 points combined in the entire game and were 6/23 from the field. Brutal, right? But get this…

Part way through the first quarter of the next game, these two stars combined to score 12 points and were 6/9 from the field (or something like that). They had dramatically outperformed and were suddenly hot again.

But were they?

The book Thinking Fast and Slow (review coming soon) shows different ways our brain processes information and creates illusions. One of these illusions is the “hot hand” in basketball. Science has categorically proven it does not exist.

And yet…

Announcers and fans alike rant and rave about basketball stars being hot and cold. But in a sport with so many games and so many shots per game (particularly by the star players/Kobe) the shots taken in a single quarter vs. a multi-season career are completely insignificant. The sample size is too small.

Let me show you where I’m going with this.

Below are two graphs of a random-number generator that feeds into a rule-based trading system.

Each set of graphs is a unique set of random numbers.

The graph on the left shows an equity curve over 3,500 trades, and the graph on the right shows a random 12 trade sub-set of the same equity curve.

Behold:

Screen Shot 2016-05-11 at 10.19.57 PM

This first curve is probably what you’d expect. But it’s not exactly typical.

The returns can still be smooth in the long-run and bumpy in the short-run…

Screen Shot 2016-05-11 at 10.18.55 PM

Below is another volatile sub-set. Remember, these are all just subsets of the bigger curve (which consistently looks great, don’t you think?)

But on a short term basis…

Screen Shot 2016-05-11 at 10.19.16 PM

It’s not always pretty. And sometimes…

It’s downright ugly:

Screen Shot 2016-05-11 at 10.18.36 PM
Losing streaks happen, in basketball and in trading and investing. The plain truth is, our brains aren’t well-wired to deal with stats like this. We quickly jump to conclusions based on key inputs.

But like it or not, stats like this are how the world works…

While the narrative appeal of a super-star on a hot-streak sounds nice, it’s probably more likely that they’re temporarily oscillating from one extreme to another and you’re exaggerating the contrast. You might also want to keep this in mind before you give up on your investing methodology in search of the next hot trading system.

 

Do You Follow Through On Your Stock Ideas?

I’m curious to know: Do You Follow Through On Your Stock Ideas?

I realize that might sound ridiculous. But it’s an honest question.

Let me explain:

A lot of traders and investors spend innumerable hours on trade analysis and stock picking. It’s an area that receives enormous attention. Everyone is incredibly focused on improving their analysis, updating their education and feeling confident in their stock ideas.

But here’s the thing…

Markets are random. Completely and totally unpredictable. You’re never going to be right 100% of the time. Can you accept that?

And here’s the other thing…

If you can’t accept being wrong, how is it manifesting itself? Are you hesitating on pulling the trigger? Are you spending additional time looking at information and news articles you wouldn’t normally include in your investment process? Are you ignoring the losses in your brokerage account?

Look, we’ve all been there. (insert monkey-covering-eyes emoji)

But at some point, you have to accept you’re going to be wrong, create a plan to manage risk, and then follow-through on your stock picks.

Make sense?

Here’s the last thing I’ll say about following through:

Doing great analysis and taking action on it are not the same thing. A lot of analysts are afraid to take the plunge. And a lot of day traders dive in head first without ample analysis.

But if you’re reading this website… chances are you err towards the former. Now…

I’m sorry I don’t have an answer for you, but awareness is the first step. So keep an eye out for signs you might not be following through on all the hard work you put into your stock picking. If you find yourself reaching for another investment book after you’ve already read 10, well…

Maybe you shouldn’t. And that’s coming from a guy who’s read hundreds of finance books.

Instead:

Maybe it’s time to follow through. Maybe it’s time to take action. And maybe it’s even time to make some mistakes in the real world and figure out how to deal with them.

Got it?

By the way… as you might have guessed… the only reason I can opine so genuinely on this topic is because (naturally) it’s something I’ve struggled with myself in the past.

Tips to Follow When Making Financial Decisions in Your 20s

People tend to take risks when they are young. Old people prefer to settle down. They are not risk-takers. When making financial plans for 2016, keep this maxim in mind. Why? Because if you are a young person, then you should be taking risks.

But taking risk is not same as acting like a foolhardy. When making financial decisions in your 20s, don’t be hot-headed. In this article, I’ll help you get an idea of how to handle your personal finances when you are young.

Credit card debt

We tend to ignore credit card debts. Not only does this not help us, but it actually intensifies the problem. My advice to all of you is pay off the debt on your credit cards as early as you can. Don’t let it accumulate.

Due to poor financial decisions in your 20s, you may incur credit card debts. True, it’s not good for you but there’s an advantage – you have plenty of time ahead, which you can use to pay off the debt.

You may find yourself a job or make some quick cash in some other ways. Feel free to take risks,because the gain would be colossal – you’d get rid of the most annoying thing in this world – debt.

Budgeting skills

Young people need to learn budgeting. They can make a household budget and stick to it. They don’t need much grey-matter for any of these, all they need is smartness. First make a list of all incomes, from both stable and unstable sources. Then list down the monthly household expenses. Next, tally these two.

Let’s say your total household income is $4,000 a month and expenses are $3,000. You earn $1,500 from from stable sources and $1,600 of your monthly expenses are on required utilities. Try paying the required utility bill from stable income and the non-required bills like eating out, watching movies from non-stable income sources.

Acquiring budgeting skills in your 30s and 20s, especially in your 20s is critical to financial success in later stages of life. Financial decisions in your 20s determine how you’ll do with your finances later. Lessons learned from budgeting skills stay with you forever, benefiting you this way.

Using credit cards

Credit card again! Paying down existing debts helps but prudent usage of credit cards helps even more. Never use more than 10% of your credit limit. If your card has $500 credit limit, never use more than $50. Before you use the card again, pay off the $50 debt.

Retail outlets allow buyers to pay using their credit cards, which is a reason behind the craze of purchases made using credit cards. Financial decisions in your 20s can be mostly wrong. Overuse of credit card is one such decision.

Another thing, never make the minimum monthly payment. Always pay the full amount. The minimum monthly payment is often less than 10% of the debt. Given it’s 1% and you have outstanding balance of $1000, it takes more than eight years for you to clear the debt. Now add interests and charges and it takes even more. Plus, you end up paying more than what you actually owe.

When you are young, take risks. Pay all the debt at once even if you have to break your savings for that. You can earn money in the future, you have plenty of time.

Timely bill payment

You need to pay your bills on time. Young people tend to be forgetful and they don’t take things seriously. The result? They make delays in paying auto loans, electricity bills, student loans, etc. The untimely payment of bills hurt them in the end.

Your financial checklist probably excludes timely bill payment. But take it from me, it’s way more important than you think it is. Not paying bills on time is a bad habit. Beyond that it hurts your FICO score. Want to know how it happens? Then read on.

FICO score

Here also, young people, especially those who are in their 20s and 30s have an edge. The FICO score can be under 620, making it hard for you to get approval for loans. You can still improve your FICO score by making lifestyle changes because FICO score is linked to your lifestyle.

The records of delays in bill payments stay on your credit report. Removing them is a herculean task. You have to negotiate with creditors and request the credit bureaus. At the same time, use your credit card to improve the score. Still there’s no guarantee that the records will be removed or the score will improve. Hence, be on the safe and pay all the bills on time.

Retirement savings

You may be young, but that’s no excuse not to remember that financial decisions in your 20s can make or break your future. One such decision is saving for life after retirement. Saving consistently for the post-retirement life makes your future safe.

The 401(K) tax is huge. According to estimates done by private sources, an average person pays more than $100K through his service life for paying 401K taxes. This finding shows how much you can save if you make cogent plans.

Use all the non-taxable accounts to build your savings. Set up an IRA account for tax-free saving. Use the health savings account (HSA) to save because your employer sends money to this account before tax deduction. When you are young, spend time and resources to build savings for a better and secure future.

This article is contributed by Tina Roth who is the owner and blog at Pro Finance Blog – a leading personal finance blog.

2 More Trading Chats

I’ve been training for a race lately. So my time on the treadmill has been on the heavy side. The good part is, that gives me lots of time to listen to trading and investing podcasts.

Last week I told you about the chat with a trading psychologist. And this week I have two more Chat with Traders Podcasts that I wanted to share. The first one was with Jerry Parker, and the second with crude oil trader Tracy aka ChiGrl.

As always, the podcast does a great job sharing educational trading lessons. Below are my unedited thoughts, while listening to the podcast.

Jerry Parker Podcast:
Trading is hard. It has to be. It’s not easy. Low win rates are okay. Drawdowns are good. Do the uncomfortable.

Think of optimal loss size… Not too big or small. Aims for 40% win rate

Diversify trades across time frames.. Some systems are faster or slower than others (eg contrast 100 day breakout with 300 day breakout).

Sample size of backtest is most important thing in trading (qualitative!)… Too many variables in system limits sample size (which really matters in fat tail environment)

Build robust systems. Bet small. Buy rallies and sell the lows

Chigirl Podcast:
-your head is your enemy – keep yourself out of your way. Make the same trades again  and again.

The market likes to balance itself

No matter you’re doing or trading passion/enjoyment can help fuel your dedication. But you need a system to make it automatic. Don’t use discretion until you’ve been doing it for 10 years.

What’s going to make the market react?

If you rely on fundamentals, know your market:
Rig count is a poor proxy for oil production right now

About guessing or predicting and just rare what’s in front of you.

Patience is very important to long term success. You don’t need to be trading all the time. Wait for the opportunity to come to you. Trading should be boring. I talk about trading more than I trade. Avoid overpaying your broker!

Random: Wunder Capital was the sponsor on one of the shows. Don’t know about this company in particular, but it’s neat to see impact investments coming to retail market so quickly.

 

Chat with a Trading Psychologist

I was listening to Dr. Brett. Steenbarger on the Chat With Traders podcast this weekend. And I couldn’t resist the urge to share it with you here. If you haven’t listened to this yet, I highly recommend it.

Below are links to the podcast, as well as some additional relevant resources for one of the best trading psychologists around.

And as I explained in my review of Trading in the Zone, trading psychology is something I can’t get enough of. I hope you’ll feel the same way!

Finally, I’d be remiss if I didn’t remind you that I mentioned Chat with Traders in the best trading podcasts of 2015 blog post. So congrats to you home-gamers following along who’ve already caught this one.

Chat with Trading Psychologist Dr. Brett Steenbarger:

SoundCloud podcast link: How to master trading psychology, and introduce new best practises w/ Brett Steenbarger

iTunes podcast link How to master trading psychology, and introduce new best practises w/ Brett Steenbarger

Dr. Brett also has a great trading blog and engaging twitter account.

And if you want to hear him speak a little more, check out his appearance on the Trend Following podcast with Michael Covel.

Now as promised, below are my unfiltered conscious thoughts, while listening to/reflecting on the podcast. Take it for what it’s worth!

Notes on Podcast with Trading Psychologist Dr. Brett Steenbarger:

Do more of what works… Model your success! Update your success diary/playbook and review it.

Adapt to changing markets (all businesses must)… Drawdowns may reveal changing market conditions…

Improve without curve fitting… Build different systems for different market conditions. Diversify with different methodology for different conditions.

Build on your strengths.. How does this reflect in process? (Eg are you best at slow thinking methodical science experiments… Also compliments time horizon… Deeper and more analytical experimental design… Find data and perspective other people are ignoring. If you do what everyone does you will get the results everyone does.)

Best practices > repeated > lead to best processes

Habits and routines are much more important than motivation… Implement best practices routinely to develop positive habit patterns. Motivation follows action.

Leverage your success and work around your weaknesses. Acting on your strengths is fulfilling (intrinsically rewarding)… We feel strong and fulfilled when acting on your strengths… If you’re intrinsically frustrated that means you might be working in an area you are weak at.

Goals need to be followed with a specific plan. A goal without a plan is a wish. You need daily actions to drive consistent and regular progress towards goal. P&L goals emphasize outcome over process, which can lead to performance anxiety. Focus on what you can improve on. Risk adjusted returns are a better way to focus.

Traders need to make friends with loss and failure. They can teach us and make us stronger. It’s how we become better. Your drawdown is telling you what’s not working.

Think in percent and basis points… Easier psychologically than thinking about dollar amounts and thinking about money. Putting too much pressure on yourself can be a big challenge. You need other thinngs in your life outside of market to help refresh you during draw downs.

And that’s it! Feel free to mention your favourite part of the podcast in the comments below.

 

Best Cities to Live In

I recently came across new infographic with 10 of the best cities to live in. I think being a successful investor in any of these cities could be a lot of fun.

The selection is based on two essential parameters, Quality of Life and Cost of Living, including meal expenses, monthly transportation, basic utilities, internet and business environment.

Cost-of-Living

Manual of Ideas Google Talks

Long time readers will remember my Manual of Ideas book review. So I thought you might also be interested in the video below. It’s a Google Talk from Manual of Ideas author John Mihaljevic, on the secret to finding great investing ideas.

So if you’re a value-focused investor looking to learn something this slow Sunday morning, why not check out this educational video below:

And of course, if you’re still curious about finding value investment ideas then you might want to see if Manual of Ideas is the right investing book for you.

As a reminder, here are a few more Google Talk videos that equity investors might find interesting: