Cheat Sheet

Trading For Canadians For Dummies

If you want to make money as a successful stock trader in Canada, a few important tools can guide you down the right path. These articles offer helpful tips for developing strong trading skills like reading technical signals, analyzing the cycles of the Canadian and American economies, and recognizing whether you’re trading in a bear market or a bull market so you can strategize accordingly. You’ll also find a handy list of the top online trading resources.

Identifying the Beginning of a Bull Market in Canada

Boost your stock trading skills (and returns) up a notch by learning to recognize the signs of a bull market before your neighbours do. How will you know whether the Canadian economy is entering a bull market? Read on to find out.

  • Bull markets begin before the economy starts to recover.

  • Interest rates are low.

  • Industrial production statistics are inching higher.

  • Technology and cyclical stocks are starting to rise

  • Weekly chart of S&P/TSX shows higher highs and higher lows; the MACD line is above the trigger line and rising.

  • Bullish percent index indicator shows bull alert or bull confirmation pattern.

Identifying the Beginning of a Bear Market in Canada

As the stock market fluctuates, there are some key indicators that help Canadian traders spot a bear market. Learn how to recognize these first signs of an economic decline so you can strategize and be prepared.

  • Bear markets typically begin before the economy starts to decline.

  • Interest rates are rising.

  • Industrial production is starting to fall.

  • Basic material stocks, energy stocks, and consumer staples are performing well.

  • Weekly chart of S&P/TSX shows lower highs and lower lows; the MACD line is below the trigger line and falling.

  • Bullish percent index indicator shows bear alert or bear confirmation pattern.

Advice for Canadian Stock Traders in a Bear Market

When the economy takes a downturn in a bear market, your trading strategy as a Canadian investor should be to sell or short-sell fundamentally weak companies, enabling you to protect or even build your wealth. Look for companies that fit these conditions:

  • Poor earnings or no earnings.

  • Situated in a weak sector.

  • Operating in a declining economy.

  • Stock is approaching a technical sell signal on its bar chart and the company is performing worse than the average stock with low relative strength.

Bull Market Stock Trading Tips for Canadian Investors

In a bull market, when the economy is booming, your stock trading strategy should be to buy fundamentally strong companies, which will (hopefully) earn you big returns — whether you're an investor in Canada or anywhere else in the worldwide stock market. Look for companies with the following characteristics:

  • Earnings that are growing faster than average.

  • Conducting business in a strong sector.

  • Operating in a growing economy.

  • The company's stock is approaching a technical buy signal on its bar chart and is performing better than the average stock with high relative strength.

How to Use Fundamental and Technical Analysis in Canadian Trading

Successful stock traders use fundamental and technical analysis to forecast and strategize. Follow the steps for using these tools in the list below and you’ll be well on your way to unlocking the secrets of the Canadian and American stock markets.

  1. Determine economic cycle position.

  2. Determine position within sector rotation.

  3. Decide which sectors are ascending.

  4. Determine leading stocks in the ascending sector.

  5. Evaluate the Bank of Canada and Federal Reserve positions.

  6. Confirm economic cycle with index charts.

  7. Determine whether leading sectors are range bound or trending.

  8. Determine whether leading stocks are range bound or trending.

  9. Enter the trade only if the stop-loss point is nearby.

  10. Trade within your preferred time frame.

Top Ten Stock Trading Web Sites for Canadians

The Internet is a valuable tool that stock traders can use to sharpen their skills. Canadian traders have a wealth of online resources available to them. The following list offers links to Web sites that offer general trading education and information, analysis of companies, and trading tools and advice.

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