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Discussion Starter #1
Hi everyone,

I've dabbled in stocks before and made some bad investments, but also got lucky with junior gold companies (thank you stock guy on BNN). But now I'd like to understand what the heck I am doing and get into trading stocks more seriously. I don't have the stomach for day-trading, but I am very interested in short-term trading.

Can anyone please point me to some good resources for stocking trading? I'm looking for something like a dummies guide for trading, as well as some general strategies for picking and analyzing stocks, how to spot trends, picking up on indicators to bail out, etc.

Thanks! :)

PS - Gold stocks I'm still holding are OSK and IMG. If anyone has any opinions on them, I'm all ears!
 

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First of all there is no such thing as a magic bullet or a "trading for dummies" that will be a short cut to learning what you'll need to know to be a successful investor/trader long term.

Your question asking for opinions scares me - you must have your own plan, relying on the opinions of others is extremely dangerous and will not lead to success in the long term. You are in the very dangerous position of taking a "tip" or two and actually having them pan out. That is scary, because it leads new traders to believe the game is much easier than it is. I know this sounds odd, but you would be far better off if you took a loss on those initial tips and were coming back to figure out how to do it right.

For now I would suggest starting with something safe... you might want to start here: http://canadiancouchpotato.com/

If you are serious, you can start by reading a bunch! Here are some recommendations:

Although you may need more than this - read a lot.

Start with Elder's stuff IMO.

http://shop.elder.com/shopdisplaypro...id=1&cat=Books

Specifically:
Trading for a Living
Come Into my Trading Room
Entries and Exits

In that order. You don't have to buy them from him, I have gotten all three from the library although the wait list was LONG. Get the study guides with the books - library had them too. I have not read "Sell and Sell Short" yet so I can't comment on that one.

You should also read "Market Wizards" and "The New Market Wizards" by Jack Schwager
http://www.amazon.com/dp/1592802974?tag=timosyke-20&camp=213381&creative=390973&linkCode=as4&creativeASIN=1592802974&adid=0XC3XD7F43RH5SABS9ME

Another good source of what books are good is: http://www.investimonials.com/books/
I personally would stay away from the penny stock stuff - too crazy and volatile for a new trader/investor, but there are lots of excellent book recommendations on that list.

There is lots of other free content out there too - just beware of it's source always! Free advice is worth what you pay for it, including mine!

Here is a couple of free podcasts:
http://www.optionsource.net/commentary.php - Canadian guys that cover our markets.

http://www.tradingacademy.com/radio/ - Run by Online Trading Academy - office in Toronto - but good free trading daily podcast - call in at 6:00 PM at night (you can watch online) and get free courses on CDROM

http://www.theuptrend.com/Index.aspx
Just found this one on iTunes - daily short market chart review videos you can sign up for - free - every morning at 7:00 AM.

Lastly - and I can't highlight this one enough for the value you get for FREE:
http://www.optionseducation.org/
Yes it is options focused - but it's run by the Options Industry Council so it's very even handed, up front about risks, and not biased as this content is not provided by a broker. The amount of free education here is quite amazing. The OIC guys also have a free podcast that is excellent and you can get all of that off of their education site as well. I subscribe to that podcast in iTunes.

I've also been pretty happy with http://www.optionsxpress.ca/index.aspx
You can open an account for free, get all of their education, and never fund the account at all if you want. I know there are tons of other great online brokers in Canada - read the Globe's latest survey and look at the education and tools reports - yes you need an account to access this but what you don't often need is any money! Make sure that's true before you start but many of the discount brokers will let you open an account and do virtual trading for absolutely 0$. Just be aware that paper trading or "virtual trading" is not what it's really like when money is on the line - read Elder's books for more on this.

Other podcasts (free) to subscribe to or download:
The Disciplined Investor (Andrew Horowitz) - get the book by the same name from the library as well it's not bad. http://www.thedisciplinedinvestor.com/blog/
Andrew also does this one: http://winninginvestor.quickanddirtytips.com/ which is great fundamentals on investing

This is more general but a FANTASTIC podcast:
http://www.npr.org/blogs/money/
 

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Lephturn, oh man, thank you very much!

Absolutely, I completely agree that I got very lucky with those junior mining stocks. I mean, I did do some research, but at the end of the day I was basically rolling the dice. What I would like to do now is actually learn how to do things right, and make decisions that I can actually justify.

I checked out the survey you mentioned. I'm currently registered with Questrade, which I see is down at #7. I went with them because of their low cost, but I see that they are lacking in tools compared to the competition. Qtrade does sound attractive, but it's more expensive so I'm going to need to do more research before making a switch.
 

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In my humble opinion, you can make investing as simple or as complicated as you want to make it.

I have been investing for a number of years now but I consider myself a simple man and so simple is the way that I choose to invest.

I believe that there are two good approaches for a new investor to take.

Either you can do some research and invest in approximately fifteen dividend paying stocks of large corporations that you believe will stay in business and which have a sound history of increasing their dividends over time.

Or, you can invest in an 'Easy Chair' (Couch Potato) portfolio along the lines of the model portfolios outlined at www.canadiancouchpotato.com

Neither of these approaches require an advanced degree in rocket science.

I am assuming that you perhaps have better and other things to do with your time than getting bogged down in mountains of research. However, if that is your bag, go ahead and drive yourself nuts!!!

Buy, hold, rebalance, and prosper. There is much to be said for simplicity.:cool:
 

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Of those approaches I think the dividend growth plan is a really good choice. That said - I do not plan to allow my account to get cut in half. Ever. Yes, it takes more knowledge and a little more time to learn how to protect yourself and increase returns but I think it's worth it. I'd rather spend my time doing this than watching TV, playing games, or whatever. Not that I don't do any of those things... sure I do! But I do less of that stuff in favor of a bit more time investing. I'm talking a few hours a week here outside of reading (I would read anyway it's just a matter of what).

You are right though, it only works if you take some pleasure in it. I enjoy the game and I love to learn - so reading and learning about investing is all good for me. A couch potato portfolio is a great place to start, but if you are interested and enjoy learning and investing you can enjoy lower draw downs and increased returns.
 

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Discussion Starter #6
Belguy, thanks!

I don't mind doing the research but I would be interested in easing myself in with these more passive approaches. Any good resources on divided paying stocks? I just really don't know where to start. :eek: For what it's worth, I'm only going to have about $2,000 to play with.

I think I'm going to stick with Questrade for now since I won't be very active.
 

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Can anyone please point me to some good resources for stocking trading? I'm looking for something like a dummies guide for trading, as well as some general strategies for picking and analyzing stocks, how to spot trends, picking up on indicators to bail out, etc.
If you are looking for a specific book about stock trading, then get hold of "A Beginner's Guide to Day Trading Online" by Toni Turner. It was written in 2000 so some of the regulatory information are outdated, but it still provides much relevant information about the world of stock trading. It is an excellent primer, but also a valuable resource to any type of trader. Don't let the title fool you. :)

Also, you should book mark www.stockcharts.com - lots of information, especially for technical traders.

MB
 

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When it comes to individual stock picking, I can't really make any recommendations because, in the end, you have to do your own analysis to determine if each stock fits into your overall objectives and I have learned that you shouldn't rely on the recommendations of others for a whole variety of reasons including potential conflicts of interest considerations.

As for myself, I hold a core portfolio of broad-based, lowest fee ETF's in which I have emphasized smallcap and value funds and have supplemented this with some emerging markets ETF's and the RBC Global Precious Metals Fund. My bond allocation is mainly in the PH&N Bond Fund D but I also have small holdings in corporate, high yield, and junk bond ETF's.

I am not a proponent of market timing and tend to be a buy-and-holder through all market conditions. In other words, I am prepared to take the full rollercoaster ride rather than trying to jump on and off for whatever reasons.

I do not try to shoot the lights out with any of my investments so that I can have first bragging rights at the next party which I attend.

First, get your asset allocation right according to a formula that will allow you to sleep at night through all market conditions and where you will not be tempted to sell during difficult market conditions or chase after hot investments.

Then, select your individual building blocks that also reflects your comfort level. Keep your fees as 'little' as possible by opening a discount brokerage account with the lowest trading fees. I would aim for anything below $10 per trade (under $5 even better!!).

Once you set up your portfolio, trade only for rebalancing purposes in order to approximately retain your original targeted asset allocation. Most investors reduce their long term returns by trading too often and often for the wrong reasons.

Buy cheap, HOLD through ALL market conditions, be able to sleep well while doing this, rebalance to retain your original targeted asset allocation, and prosper.:cool:
 

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I can only stomach "buy and hope" for dividend growth stocks - at least that way the value of the shares themselves are essentially meaningless so long as the dividend is maintained.
 

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at least that way the value of the shares themselves are essentially meaningless
No, no they are not.
It would take years of dividends to make up a 40% drop in stk value, like what happened between 2008 and 2009.
You could, of course, keep pouring extra capital into the stk and keep averaging down but soon it'll get too risky to pass the sleep test.
 

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I can only stomach "buy and hope" for dividend growth stocks - at least that way the value of the shares themselves are essentially meaningless so long as the dividend is maintained.
No, no they are not.
It would take years of dividends to make up a 40% drop in stk value, like what happened between 2008 and 2009.
You could, of course, keep pouring extra capital into the stk and keep averaging down but soon it'll get too risky to pass the sleep test.
Agreed - the share price is not meaningless, especially if you put in more while it's down.

However, IMHO, there are a lot more factors that just "it's dropped 40%".

If you like what management is doing, the business the company is in and don't believe the original price was over-valued, why not see the 40% drop as a discount? In this situation, I don't see how it would affect the sleep test.
Where you already own the stock - surely you picked it because you liked it in the first place.

For example - yes, Bank of Nova Scotia dropped 50% but it was close to the same price in under a year. Then too, a buy in Mar 2009 means a much better yield - 7% seems much better to me than 3.6%. Note that there were no dividends required to recover plus a gain of 100%.

Then too, for those with who are comfortable with more risk/less liquidity, there was the opportunity for a 31.5% yield coupled with a capital gain of over 160%.


If you keep a stock where the business has changed, it was over-valued or some other factor then yes, the stock could tank for years.

I'm guessing that Lephturn is avoiding these as he mentions "dividend growth". If this means the company has consistently increased it's dividends, I suspect there won't be many that will stay down that much for years - unless they are a US company where the whole system is a mess.
 

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You can a will take a 30-40-50% if you stay in the markets long enough.

Then you will find out if you have the stomach for investing.
 

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Agreed - the share price is not meaningless, especially if you put in more while it's down..
Meaningless is too strong a word, but it's down to the fact that it's based on your yield to cost basis, not the price of the stock. You could potentially lower your yield to cost basis if the price drops a bunch and the dividends keep growing, but that's only going to be true if the price goes down within the first few years. If the dividends have been going up for a few years even if the stock price pulls back quite a bit you still may have a yield to cost that's better.

So it's not meaningless - but it's certainly much less important than the dividend.

For all of these quality dividend growth stocks, a 40% market decline is a once in 10 or 20 year opportunity to buy in at a fabulous yield to cost.
 

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Discussion Starter #14
Started reading Trading for a Living. There's some language in there that as a beginner I don't fully understand, but I'm learning a LOT. :)
 

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Started reading Trading for a Living. There's some language in there that as a beginner I don't fully understand, but I'm learning a LOT. :)
Just remember that a little knowledge is a dangerous thing. But to have the courage of your convictions is satisfying. Especially if you sometimes beat the market...you are too young to abdicate responsibility.
 

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Meaningless is too strong a word, but it's down to the fact that it's based on your yield to cost basis, not the price of the stock. You could potentially lower your yield to cost basis if the price drops a bunch and the dividends keep growing, but that's only going to be true if the price goes down within the first few years. If the dividends have been going up for a few years even if the stock price pulls back quite a bit you still may have a yield to cost that's better.

So it's not meaningless - but it's certainly much less important than the dividend.

For all of these quality dividend growth stocks, a 40% market decline is a once in 10 or 20 year opportunity to buy in at a fabulous yield to cost.
This is why I like reading forums such as this, in working out what is said I tend to learn about things I wasn't aware of.

I was thinking more about the effect on the current yield where you'd already decided to purchase the stock. Buying at the lower share price is increasing the current yield for the shares purchased compared to buying at the higher share price.

If we extend this to the overall yield to cost, I'd say you are still ahead. Even if the yield to cost is going to be lowered, it is less of a hit than buying at the higher share price. The only way the preserve the yield to cost basis at a good number is not to buy. However - looking at Bank of Nova Scotia, I'm not sure I'd be happy preserving a good yield to cost basis and giving up a 100+% capital gain in a year.

I do see your point that the 40% drop on the overall yield to cost, likely will not have as big an impact. However, like my original post *grin*, there's a lot more factors than simply rising dividends and time.

When I look at the formula listed on Investorpedia:
http://www.investopedia.com/terms/y/yield-on-cost.asp

The Yield to Cost is the annual dividend by the average cost basis times 100.

So some factors that would give the 40% drop a better chance of lowering the yield to cost are:
a) a slow dividend growth rate
b) a lack of share splits
c) a big purchase that results in the ACB dropping.

Come to think of it, it's not the dividend per se but a rising dividend or a change in the ACB, likely from a split - if no buys or sales are made.
 

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Yes, it is all about the growth of the dividend. If you are re-investing those dividends all along as well, it gets even better.

Certainly when the market pulls back and these stocks go down 40% but maintain their dividend it's an excellent opportunity to increase your investment if you have the extra cash. Even if it doesn't lower your yield to cost, it still may be an excellent opportunity to get in at low prices.

My point in all this was not about additional investment - clearly when the price drops it's a good time to buy - but that the price of the shares for your existing investment in these dividend growth stocks can't really hurt you. If you have no extra money to invest (maybe drawing income in retirement) the price of the shares would only matter if you were forced to sell them. If you are simply using the dividends for growth or income but can keep the shares, the short term price fluctuations don't really make a difference.
 
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