Saturday, October 18, 2008

Globe and Mail and the way forward

This is a look at the past, the present, and the future.

A while back I was contacted by the Globe and Mail and asked to participate in the "Me and My Money" column. The column is below, click to enlarge. The paper version has a fairly large picture of me playing my guitar, very cool.

Larry MacDonald also mentioned me in his own blog, where he discussed day trading on the TSX. Anyone else out there day trade the TSX? Technically, I'm not day trading since I don't watch the screen during the day. I put my order in at night, it could trigger the buy and sell in the same day, thus called a "day trade". Below the article I describe what has changed since then.

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Something has changed since the article was written. I have moved all of the RRSP accounts that hold mutual funds to a discount brokerage. IB does not offer RRSP, LIRA, or RESP accounts so I went elsewhere.

Why did I do this?:

First of all, I had my funds in RRSP's for the same reason most other people do, not enough time to manage it and for the long term I felt the pro's would do a better job. For the most part this might be true. The single issue I have with this is their ability to exit when they smell something rotten, such as a declining 50 day MA, even worse with a declining 200 day MA. Even if they knew a few US firms were about to implode, how could they liquidate a fund of that size? Who cares. I know I could liquidate my holdings in a blink of an eye and not cause any market movement.


The long term plan:
First of all, cash is a position. Decide for yourself when to get in and get out, before your emotions take control. Here is my plan. After reading a book about a guy who purchased solid dividend paying companies, and retiring, I decided to go on my own. I will only purchased companies with that meet certain criteria, the top two are "must pay dividends" and "from the chart". There is more to the dividend research than that, just like there is more to the "chart" than that. Basically, dividend paying companies in an uptrend, or at support.


How has it worked so far? Pretty good. In the past few weeks some of the fund transfer was complete so I went on a search to find some stocks on the TSX. (I wasn't about to buy on the US exchange as the CDN dollar has been beaten up lately). One of the stocks that I set up an order for was BMO. All four stocks had limit orders set up, set up at prior support. I figured it could take up to 4 weeks to get a fill if the market was going to be ranging. To my surprise, the very next day the market got killed. All four orders were filled. Scary you might say. It turned out pretty good. Patience to wait for the price was a key, after all, it's long term. Here's a chart, my fill price is the white horizontal line.

BMO.TO - Weekly


BMO.TO - Daily



Notice that there is a triple bottom, and each bottom on the weekly chart has less volume, that's good. As far as risk management for this trade there are two options.

First, if the price breaks that support - get out quick, usually a fourth test of a horizontal line is like a hot knife through butter.
Second, set the stop at my break even while considering any dividends received, perhaps setting the stop a little lower for breathing room. I'm looking at the close prices before I place a stop order.
Third - never sell. Strange thing to say but at the white line it is 7.5% yield. Better than a sharp stick in the eye.

So lets sit back and see which way the market heads. The path of least resistance is down. To be back in an uptrend we need higher lows and higher highs. Or we could range for a long, long time. If you want to see what a bottom looks like (it's hardly ever a V on a daily chart), check out today's video at alphatrends.net. Also take a look at this Bear Market Post to gain perspective. Yo be your own judge. If your confused, put your money under your mattress and wait for the bullets to stop flying. Cash is a position. If you know what your doing, follow your trade plan.

One more thing - I almost have a working version of an updated tipster trendlines with more bells and whistles. This one has trigger buttons and drop down menus right on the chart. Should be ready in a week or so. Is anybody using version 1.0 or 1.1 of the code to trade with?

Disclaimer

The information presented on this site is for educational and entertainment purposes only. This site contains no suggestions or instructions that you must follow, do your own research and due diligence before committing your cash to the markets. Your on your own.