Thoughts on Day Trading

I day traded for about 6 months last year and it definitely is a full time job, you have to analyze charts, moving averages and pick your strategies but you can make some good returns if you focus. I used to listen to Daytrading Rock Star (I still do off and on) and his radio show is cool during the day to help you feel connected to other guys that are trading. You can make money off of $500-$2,000 it depends on your methods. If you trade options you get more bang for your buck but I suggest starting out with simple bid/ask trades before going into greeks and option jargon. I made some good trades and then some bad ones and in the end for me at this moment I don't have the time to follow things like I should so I focus on dividend stocks to get a steady return.

End Of The Year Dividends

So here's another tip that I just figured out... a lot of companies will pay larger dividends at the end of the year, sort of like a Christmas bonus. Just got mine and I'm glad I found out without even knowing.

Just For Fun

I want to take a quick break from the stock talk and show what I think I may buy once I may my first 100k from my stock investments.  This car is fantastic! A perfect blend of motorcycle and passenger car.  It's still in the concept stage but from the article it looks like this one has more of chance than some of the other hot concept vehicles that have graced our screens but never seen the light of day.

Nissan BladeGilder

From $24 to $690,000 In Four Years

In 2009 a Norwegian man bought $24 worth of bitcoins and forgot all about them.  Four years later Mr. Kristoffer Koch checked his account after reading an article and low and behold his 5,000 bitcoins were worth $690,000.  He promptly cashed in around $186,000 and bought an apartment in a sought after neighborhood in Oslo.  Read his story here.

Norwegian Man Buys Flat With Forgotten $24 Bitcoin Investment


It may be worth a look to watch the bitcoin market and get some on the dips.

By digitalart, published on 26 July 2011
Stock Image - image ID: 10051347

Diversifying Your Portfolio and Dividend Yields

To start building your portfolio you should keep in mind that you must diversify. Tempting as it may be to put all your money into that one stock that is paying big dividends, you have to be smart and spread your money around to protect your investment

It's a good idea to put your money into different industries i.e. manufacturing, retail, technology, financial, minerals and entertainment.  This will keep you from being hurt too much when various sectors of the market are experiencing trouble.

I created a list of stocks that I am watching I chose to invest in several of these stocks because of how they look in my technical analysis. Many of them are oversold and are in a good position to rebound.

• Retail – TGT, WMT, DG
• Housing/REITs– ARR, CYS
• Technology – MSFT, ORCL, CSCO
• Manufacturing/Automotive – TSLA, F
• Financial – JPM, WFC, BAC, PNC, UBS, RLI
• Entertainment – SNE, TWX, LGF, DIS
• Communications – VZ, T
• Minerals – GLD

I especially like buying retail stocks right before the holidays they may take a downturn after their earnings report in the new year but at least you have an option to sell before then.

I mostly buy stocks with a high dividend yield however I will buy stocks that don't pay a dividend only if it’s a break out company, Tesla fits that criteria.

I recently read a couple of articles about diving deeper into analyzing stocks for dividend yields.  They talked about inadequate assessment in many of the current stock analyzers.  In order to get the true dividend yield you have to look at when a company distributes their dividend. Go back and look over the whole year to see if extra dividend payments were distributed.  If a company only declares a quarterly dividend then only the distributions over the quarter will be factored into the dividend yield calculation.  This however excludes additional one-time distributions which will sometimes dramatically increase the dividend yield calculation.

In short it pays to do your research.

3 Things to Remember when Trading the Government Shutdown

As we all wait for Congress to get back to work, there are some things to keep in mind about playing the market swings. 

• Never put your money in when there is crisis (unless you found out about it before any one else)
• If you think you found out about the crisis before anyone else, chances are you haven't
• It may be a good idea to buy the dips on solid stocks that have good balance sheets and good management

I wrote a post a while back about shorting the market when it is high.  These situations are perfect examples of why shorting the market is always the most profitable trade.  There will always be an unforeseen crisis that will bring the market down and when the market goes down it goes down fast.  There is nothing that happens consistently that brings the market up fast.  The market will always go up slow and down fast.

The key is to find stocks that are overvalued and their balance sheet and management may be going through some difficulties.  At the slightest sign of market weakness these stocks will drop fast.  Conversely stocks that are strong internally will weather these dips and it is a good long term play to buy the dips on these stronger stocks.  Do your homework before jumping in and I always prefer dividend paying stocks for long term plays because it takes the edge off any potential losses and may even prevent any losses. 

Stocks that may have problems because of the shutdown are those that depend on government contracts like defense, food service, research, transportation, medical, education.  Stocks that may be insulated from the shutdown are those that don't have contracts like clothing retailers, luxury brands, entertainment, etc.

Do your homework and set your stops.  Happy trading!

Tesla Is Always A Good Buy

I really missed the boat on this one.  I saw the news article on Tesla and the battery catching fire and knew the stock would go down, but I didn't pull the trigger.  Tesla's back up something fierce today.  truth be told I should have bought stock last year when I was day-trading heavy.  It was my wife who told me to buy some and I should have listened.  In May of last year Tesla stock was around $55 then it shot up to around $100 and is now trading at $174 today. 

Elon Musk is not one to bet against.  With the savvy and courage to run multiple businesses and still keep them afloat he is the type of person who will always come out on top.  I'll wait for another dip and then get in on this one.

Bitcoins, Drugs, and The Underworld

A website called Silk Road was taken down and charges were posted yesterday to Ross Ulbricht who ran the site that allowed underworld transactions, sort of an ebay/craigslist for criminals.  The site used bitcoins as the means of exchange and allegedly made about $1.2 billion in revenues and $80 million in commissions. The site allowed the sale of guns, drugs and even assassinations. 

This definitely impacted the price of bitcoins as the price fell after the news broke but today the price has climbed back up to around $130.

Here's a news article detailing the websites activities:

http://news.yahoo.com/silk-road-website-dealt-drugs-guns-assassins-bitcoins-190640637--abc-news-topstories.html

Here's a site to check the rates on bitcoins:
http://bitcoincharts.com/

Market Update 8-13-2013

Retail sales numbers came in today and were up which helped markets to rally upwards.  This and the upward swing on the value of the US Dollar probably contributed to gold going downwards today.  When people see more opportunity in the market they are less likely to run to safe havens like gold. 

Because of the slow economic recovery I still like companies like Dollar Tree (DLTR), Dollar General (DG), Walmart (WMT) and Target (TGT).  The ability of people to buy goods is still hampered by the lack of available lending, thus people are still more inclined to look for bargains and spend less. 

How Do I Start Trading?

By Photokanok, published on 26 July 2013
Stock Photo - image ID: 100186685

The first thing to do to start trading is to set up an account with one of the online brokerage companies.  The most well-known are TD Ameritrade, E-Trade, Scott Trade and Charles Schwab.  I use Trade King because the commissions are low ($4.95) and you can call a broker to place a trade for you. The on-call brokers work magic, they can get your trade in better than your price sometimes. If you choose them let me know there's a referral program where we both can get $50.

For charts and analysis nothing beats Think or Swim. I have a TD Ameritrade account just for the Think or Swim paper money and for their Investools free classes. I don't trade on them however because their commission is $10, just for practice and info.

This will get you up and running.  The key however, is to practice before you trade.  Be sure to make use of the paper money trading tools.  This helps you to practice strategies and get used to the stress of pulling the trigger.  Your emotions will get the better of you if you let them so it's good to plan your entrance and exit strategies and to be disciplined.  

 

Are 401k's a Sham?

Recently a friend of mine asked if 401k's are a sham.  My response was that they are only one type of investment vehicle and like any other they come with risks. The main reason to have a 401k is it's free money from your employer. The other reason is to reduce your taxes because the money is taken out before taxes. The best way to use a 401k is to let the money pile up to around 20k-50k and then roll it over into a good investment property (one in a great location) through a self-directed IRA.

Here's the video that prompted his question:

 

Interest Rates

So it looks like interest rates may either plateau or go down given the latest comments from Ben Bernanke.  I'm hoping the stay low, of course for obvious reasons, I'm buying a house at the moment.  Regardless though, it helps the smaller investor to have low rates because bank loans are easier to get if you have good credit.  Even though there are positive signs in the economy it's not time yet to raise rates (personally, I don't think it's ever a good time).

Bernanke basically said that he doesn't have any intention on raising the rate in the near future which basically translates into the rest of the year.  Hopefully with this news we will see a continued rise in home sales and there will be revenue for those investing in the housing industry, which by the way is my index of choice right now.  This will also translate into good news for those wanting to buy cars because car loans will be cheaper.  So in effect this is an all around good indicator for the economy.

Are REITs Down For The Count?

As you know I've been a fan of REITs and one in particular ARR.  It's been a rough few weeks for REITs who have taken a beating because of the murmur about the Fed easing up on QE3.  This would cause interest rates to go up and take away some of the stellar profit margins that have been making REITs attractive. 

Even if interest rates go up the effect on the profit margins will be minimal.  If you consider that these REITs can pay down some of their indebtedness and refinance to create a bigger profit margin.  The advantage that REITs have is that their commodity is real estate.  It's not like any other good or service that you would have trouble getting financing for. 

I personally feel that this is a minor inconvenience.  If you look at ARR when interest rates were higher the dividends were even higher than they are now.  That tells you that the company knows how to restructure their books to create the profits that allow them to pay the kind of dividends that they have been paying.

I think that now is the time to stock up even more on ARR.

Investing in Software

Another idea I came across in my constant research on creating residual income is to buy software or apps that people have made and are still generating income.  There are a couple of sites that have been set up as a clearinghouse for people who have created apps and are selling them to investors.

Some of these apps are being sold for as low as $500.  Many of them range, however, from $1,000 on up to $50,000.

The key to making a good investment in this type of product is to make sure that the software or app is still being used.  You can check this by analyzing the data on Google analytics and through the website that is selling the app. 

By KROMKRATHOG, published on 27 April 2013
Stock Image - image ID: 100162204

However, even if the app is not making any money at the moment the question is has it made money in the past and what would it take to get the app to make money in the future.  Just like Warren Buffet's approach to investing in companies you can buy a company with a strong idea and balance sheet but is not performing based on temporal conditions. 

Sites to buy apps:

http://www.apptopia.com/

http://www.sellmyapplication.com/

Direct Real Estate Investing

If you've been following my blog you know that I've been a big fan of ARR which is a real estate investment trust.  Real estate has definitely hit a bottom and is on its way back up.  That means anything related to real estate (Home Depot, Lowes, Toll Brothers, Pulte and most of the REITs) will be headed up soon if they haven't already.

By watcharakun, published on 15 November 2011
Stock Photo - image ID: 10064745

Another way to play real estate is to actually own it.  I’ve found a new service that similar to crowd-funding, allows you to invest in the real estate market and actually own part of a loan.  This type of investing is what the big boys have been doing for a long time but the small players haven’t had access to it.  Now it’s available for the smaller investor and is giving even more returns than 401Ks and retirement accounts.  Plus it’s safer because it’s tied to an actually property.  Full disclosure: I’ve signed on as an affiliate. 

I highly recommend checking out this option for investing in real estate. 

You can check out my affiliate page and if you want more information fill out the email form on the side.

Here’s my page:  http://privatemoneyexchange.org/aff/williamsmithwes

Investing in Bitcoins

I just heard about a new online currency that is being traded and you can potentially make some money just by setting up a free computer to "mine" for the currency online.  They are called "bitcoins" and they are used as inline currency to buy anything.  Some businesses have accepted them as a form of payment already.  The currency is open source and is not controlled by any entity so there is no Central Bank.  Algorithms and code serve as the foundation for the currency and it can be traded for US dollars and other currencies as well.  The current rate is $90 for one bitcoin.  It was as high as $200 a few days ago and it was at $10 a few months ago.

The great thing is you can mine for it for free.  It just takes a long while to find any online so people have come together and pooled their computer resources to find them.  When you find a batch the group splits the batch and you get a percentage based on the amount of work your computer did.  It's an interesting concept and it can't hurt to try since it's free. I set up an account today just to see what would happen.  Let me know if you have any success.

Here's the site for info:
http://www.weusecoins.com/en/

Here's a site for how to mine for them:

http://techcrunch.com/2013/04/08/how-to-mine-bitcoins/

Here's the site to mine for them:
https://mining.bitcoin.cz/

I signed up on Coinbase.com



Update 4-18-13
The best site that I found to generate coins I've found so far is: http://bitcoinplus.com
the mining method on the mining.bitcoin.cz site mentioned is a bit too complicated. 

Check this article as well: http://startbitcoin.com/

Making Money on Put Strategies

As I mentioned before in a previous post, some very successful traders use put strategies to make a lot of money in the market.  This was a very lucrative time for many traders who do.  The market was going up and people didn't know where it was going to stop.  Then instability came into the market through Cyprus, Greece and now with the attacks in Boston.  You can almost guarantee something is going to happen in a two-month time period to cause markets to destabilize and when they do the S&P, DOW and NASDAQ all go down.  The best play of course is the SPY because it responds directly to big dips in the market.  The options are also real close between the Bid and Ask price so this makes it easier to get in and out of your trade.

The market always goes up slowly and comes down fast.  You will almost never catch the market going up fast unless it is on some news that nobody but insiders know and when it does it is usually in after hours trading so you missed the run (case in point: Sprint shot up a whole point over night the other day after Dish Network said it wanted to buy them).  So the play is to wait for the market to go up and then place put options at various points going at the most two months out.  For example the market is already down today so I would wait until SPY gets back to 157 and then as it goes up place put options for the June 155 strike price.  Then wait and see what happens.  You can place your stop at 159 and your limit at around 153 (I know the options order window in TOS doesn't show the strike price but after you play around with adjusting your trade price it will show you on the chart where your options orders are).  

Yes it's great to have stop and limit orders but always watch your trades.  There are sometimes your bid doesn't go through as quickly as you would like and you could miss some profits or worse lose money.  When you see your profit margin approaching it may be a good thing to call your broker and ask him/her to place the trade for you at your trade price.  Depending on the brokerage firm they can actually execute your trade for you better than your computer.  They can find a buyer for you and make you some good money.  I've had good experiences with Trade King and highly recommend them.

Great simplified approach to trading

I know I mentioned this guy's trading technique before but I want to post another one of his more recent videos that describe in more detail his trading style.  He has also developed a software service that gives his daily setups.

OPTION TRADER makes $105MM PROFIT

This lady has uncanny skills in picking option trades.  Her basic approach is not too complex at all.  She started out just shorting stocks as they go up, making money on the corrections.  Seems like a very successful and efficient way of trading, no iron condors, butterfly spreads, etc. just a basic wait and pounce approach.

This approach actually makes a lot of sense.  You can almost always guarantee that any stock will go down at some point in time over a two month period.  There is enough drama happening to make all stocks sink down at some point during any given week.  So by placing a put on a volatile stock when it rockets up you can almost guarantee some sort of profit during a two month window.  All the successful traders I've researched recommend a two month window for options trades.  I tend to agree unless you are strictly trying to gamble as in the case of binary or weekly options.  No one knows what's going to happen in the short term but you can almost guarantee the market will go in either direction in the long term.  She's just playing the downside.

Art Market

If you are interested in learning more about investing in art do some research on the web to see who's selling what art and at what price.  There is a formal marketplace and key site to visit is ArtPrice.com:

http://web.artprice.com/start.aspx?l=en

You can get your artwork appraised for around $50 and even bid on artwork for sale.  They also have an art market confidence index to show how interest is either waxing or waning in the marketplace.

Expanding the Topics

I'm expanding the topics that I'll cover in this blog to include other investments.  To do well financially you have to diversify your portfolio and include other things than stocks.  Real estate is probably one of the best investments you can make simply because you can rent a property even when it's value may be low.  The key however is finding a property that is in a good location and is "rentable."

Another investment to consider is owning copyrights or patents.  These investments can gain significant value overtime and the other good thing about them is that just like a property you get residual income in the form of royalties.

One last investment to consider is artwork.  If you can get art from an up and coming artist you will have a good investment that will increase in value overtime as that artist's career gains traction.  The key is finding an artist who is getting to be well-known.  Check to see where and when the artist has done exhibitions and if there is any press out there about them.  Have they won awards and have they done any high-profile installations? Also you can see who they studied with or what collectives or associations they're members of.  This will add value to their art over time.