Investment Vehicles Articles

Cheat Sheet / Updated 02-19-2025

Swing trading can result in significant gains for your portfolio but involves risks that must be managed. Not every day is a good day to swing trade because the market may not be cooperative. And even when the market is cooperative, you should only trade stocks in strong industry groups to maximize the chances of success. Which stocks you buy depends on properly applying technical and fundamental analysis and only pulling the trigger when a positive catalyst exists. Finally, your risk management system should protect your portfolio when you are wrong, while allowing profitable trades room to grow.

Article / Updated 09-25-2024

The most important determinant of whether you'll be a successful swing trader is how well you manage risk. Ask yourself these questions before placing a trade to ensure you don't cut corners: Is the security liquid? Is the security a penny stock (hopefully not)? Are you prepared to limit losses at the individual stock level? Determine which precautionary measure you'll take: Set the position size based on the percentage you're willing to lose (0.25 percent to 2 percent of total assets). Set the risk level as a straight percentage of assets and that percentage doesn't exceed 10 percent of your total portfolio. Is your portfolio diversified? Make sure your positions are spread among different market capitalizations (for example, large cap, mid cap, and small cap), different sectors, and asset classes (not to mention domestic and international securities). Have you limited your total portfolio losses to 7 percent? Cover all your bases by confirming that Each security in the portfolio has a risk amount equal to the difference between the current price and stop loss level. The difference on an individual security level is tight — around 0.50 percent. The sum of those differences doesn't exceed 7 percent of the total portfolio value. The stop loss levels are at a level representing a profit (barring a gap in prices, of course). Cut losses when your stop loss is hit — no questions asked.

Article / Updated 09-25-2024

Being a successful swing trader calls for many skills, including the ability to assess the relative strengths of various market sectors. If you determine which stage the economy is in and then use that information as you review the following chart, then you’ll have a good idea which economic sectors are likely to lead the market in the near future.

Article / Updated 09-11-2024

To succeed with swing trading, you need to know how to read market indicators. Make a swing trade that’s more likely to yield good results by getting to know the following signs of favorable conditions. (Just keep in mind that no trade is a sure money-maker.) The market is on your side. A rising tide lifts all boats. And before you buy, make sure the public equity market (for the country where you are buying the security) is in a solid uptrend. The industry group is on your side. Stocks tend to follow their industry groups up or down. If the security’s industry group is a strong uptrend, chances are your purchase will be profitable. If you’re trend trading, buy on a technical signal or a breakout of a chart pattern: The stock should be entering an uptrend (from a chart pattern) or resuming an uptrend on a technical signal. Use the ADX indicator to determine whether a trend exists. If you’re trading ranges, the candidate has just bounced off of support/resistance with a technical indicator confirmation. Watch for the technical indicator (an oscillator) to generate a buy signal. Divergences between your oscillator and the price action signal higher-confidence trades (for example, a stock falling to a support level while the oscillator, such as stochastics, traces a higher low and indicates underlying strength). The fundamentals back the technicals. Pair your great chart setup with strong fundamentals. And no, you don’t need to spend 25 hours reading a company’s financial statements. Simply verify the important items, such as financial health, return on equity, P/E ratio, and expected earnings growth rates. The stop-loss level is near your desired execution price. The best swing trading candidates are those where your emergency exit is nearby. The closer your desired entry price is to your stop-loss level, the less you stand to lose if matters turn ugly. But don’t place your stop loss at a level so close to the market price that a small insignificant move forces you out (as with most things in life, there must be a balance). You allocate the right amount to the trade. Loss is always possible, even with the best swing trading candidate. Set your position size in accordance with your trading plan, which should put an absolute ceiling on your position size and set a maximum percentage of capital you’re willing to lose on a single trade and for the entire portfolio (remember, shark bites versus piranha bites).

Cheat Sheet / Updated 05-08-2024

You're investing in stocks — good for you! To make the most of your money and your choices, educate yourself on how to make stock investments confidently and intelligently, familiarize yourself with the online resources available to help you evaluate stocks, and find ways to protect the money you earn. Also, be sure to do your homework before you invest in any company's stock.

Cheat Sheet / Updated 02-22-2024

If you want to get started in day trading, doing some preparation before you dive in dramatically increases your odds of success. From setting up your trading business (and it is a business) and learning trading jargon to tracking the markets with technical indicators and calculating your performance, these articles get you on your way.

Cheat Sheet / Updated 02-22-2024

Mutual funds have been around for decades and despite other types of investments finding their way into investor portfolios, these securities are still king in Canada. Despite their still sky-high fees, mutual funds offer investors an easy way to buy into a diversified basket of stocks and bonds, which is really all you need for growing your wealth. Here are a few key points to keep in mind when considering these investments.

Cheat Sheet / Updated 11-21-2023

If you want to invest in bonds, you need to know how to read the bond ratings that the big three rating companies use in order to help you select bonds in a risk-aware way. Knowing the right questions to ask about a bond can save you money, and you can find answers to many of those questions on the Internet.

Article / Updated 10-09-2023

One of the unique characteristics of silver among other commodities is that you can invest in it by actually buying the stuff, as you can buy gold coins and bars for investment purposes. Most dealers that sell gold generally offer silver coins and bars as well. 100-ounce silver bar: If you’re interested in something substantial, you can buy a 100-ounce silver bar. Before buying it, check the bar to make sure that it’s pure silver (you want 99 percent purity or above). Silver maple coins: These coins, which are a product of the Royal Canadian Mint, are the standard for silver coins around the world. Each coin represents 1 ounce of silver and has a purity of 99.99 percent, making it the most pure silver coin on the market. The term sterling silver refers to a specific silver alloy that contains 92.5 percent silver and 7.5 percent copper (other base metals are occasionally used as well). Pure silver is sometimes alloyed with another metal, such as copper, to make it stronger and more durable. Just remember that if you’re considering silver jewelry as an investment, sterling silver won’t give you as much value in the long term as pure silver.

Article / Updated 10-09-2023

Before you start investing or trading in precious metals, you need to understand the concepts of saving, investing, trading, and speculating; otherwise, the financial pitfalls could be very great. The differences aren't just in where your money is but also why and in what manner. Right now, millions of people live with no savings and lots of debt, which means that they are speculating with their budgets; retirees are day-trading their portfolios; and financial advisors are telling people to move their money from savings accounts to stocks without looking at the appropriateness of what they're doing. Make sure you understand the following terms — knowing the difference is crucial to you in the world of precious metals: Saving: The classical definition of saving is "income that has not been spent," but the modern-day definition is money set aside in a savings account for a "rainy day" or emergency. Ideally, you should have at least three months' worth of gross living expenses sitting blandly in a savings account or money market fund. Although precious metals in the right venue are appropriate for most people, including savers, you need to have cash savings in addition to your precious metals investments. A good example of an appropriate savings venue in precious metals is buying physical gold and/or silver bullion coins as a long-term holding. Investing: Investing refers to the act of buying an asset that is meant to be held long-term (in years). The asset will always run into ups and downs, but as long as it's trending upward (a bull market), you'll be okay. Investing in precious metals may not be for everyone, but it is an appropriate consideration for many investment portfolios. The common stock of large or mid-size mining companies is a good example of an appropriate vehicle for investors. Trading: Trading is truly short-term in nature and is meant for those with steady nerves and a quick trigger finger. There are many "trading systems" out there, and this activity requires extensive knowledge of market behavior along with discipline and a definitive plan. The money employed should be considered risk capital and not money intended for an emergency fund, rent, or retirement. The venue could be mining stocks, but more likely it would be futures and/or options because they are faster-moving markets. Speculating: This can be likened to financial gambling. Speculating means making an educated guess about the direction of a particular asset's price move. Speculators look for big price moves to generate a large profit as quickly as possible, but also understand that it can be very risky and volatile. A speculator's appetite for greater potential profit coupled with increased risk is similar to the trader, but the time frame is different. Speculating can be either short-term or long-term. Your venue of choice could be stocks, but more likely, the stocks would typically be of smaller mining companies with greater price potential. Speculating is also done in futures and options.