Price Alert Experiment

Earlier this week I shared how to use a price alert in order to make money on volatile stocks.  Today I am beginning an experiment to try executing this strategy and make some short-term dollars.

Currently, I have two brokerage accounts, one with E*Trade and the other with Robinhood.  I will be using both of these for this experiment.  I will use Robin and the approximately $400 in that account for the trades and E*Trade for the alerts.

I have added an alert for Advanced Micro Devices, Inc. (AMD) at $10.50 with hopes of buying it near $10 per share and selling it for close to $14 per share.  You can see from the past year’s graph below that this stock moves up and down between these levels a few times per year.  I am still watching The Container Store (TCS), I have an alert set up to let me know when it drops below $4 per share with hopes of selling it for $5 per share.

AMD

I am using Robinhood to make the trades because I don’t want to miss my opportunity like I did last time, Robinhood is on my phone and super easy to use so I think it is my best option to make a trade like this in a hurry.  Today I prepared for this experiment by selling all my current holdings so I would have the cash ready when the moment was right to buy.

If you have not signed up for Robinhood use this link and do so now.
It is the easiest way to begin investing in the market and there are no fees!
Here is a link to my full review of Robinhood.

I selected the stock AMD by looking at the “Trending Tickers” that Yahoo! Finance features, see the image below for where to find this.  I try to look at this list at least once a day and when I see a symbols showing up often, I know that is a volatile stock and offers some profit potential.  Today I also saw that Facebook (FB) was falling while the rest of the market seemed to be rising.  I believe the most likely reason is that a large investor sold all their shares, which led to a monkey-see-monkey-do sell-off.  I believe that FB, even though it is not as popular with today’s youth, still has many good years ahead of it.  A huge number groups and people use it to connect and schedule events; Instagram and SnapChat are not ready to replace those features even if they are replacing some others with some groups.

tt

2/16/2018

I made the following transactions with my Robinhood brokerage account:

I sold 1 share of ROKU for $47.63
I sold 5 shares of MJX for $32.62 each, total cash from sale was $163.10
I sold 5 shares of BAC for $32.02 each, total cash from sale was $160.10
I sold 3 shares of S for $5.44 each, total cash from sale was $16.32
I sold 1 share of SIRI for $6.14

I bought 2 shares of FB for $178.34 each, total cost was $356.68

Being that today is Friday, I contributed $105 to my IRA and $50 to my brokerage account, both of which are at E*Trade.

 

Check out the links at the top of the page to see all my historical trades and current holdings.

Thank you for reading, please like us on Facebook and follow us on Twitter!!
Follow this blog to be the first to know when I make a trade!

Advertisements

Margin Accounts

What you need to know and what you need to do.

The Basics:

If you have opened an account at a brokerage, you have probably seen the term “margin,” “margin account,” or “buying on margin.”  If you joined Robinhood, they call it “Robinhood Gold.” If you are new to trading you likely have no idea what these terms mean.  In a nutshell, a margin account is the way a brokerage loans you money that you can then use to trade in the market with.  This is great to have some extra money to invest when your investments do well because it amplifies your gains.  It can be extremely dangerous, too, because it also amplifies your losses.

The Catch:

Nothing is free, there are no free lunches.  Every brokerage that is willing to lend you money is only willing to do so for a profit.  The brokerage loaning you the money will make a profit regardless if you do or not.  These rates vary and if you are looking to begin a margin account, take your time and do your research. On a quick Google search, I found interest rates ranging from 2.5% to 10%, so take your time and make sure you are getting a deal that works for you.  Robinhood will loan you $2,000 for a flat rate of $10 per month.

The Details:

Regulations are fairly tight around trading on margin, this is to protect the lender and the borrower.  There are not many restrictions on what you can do with your own money but federal regulators have set rules for trading with borrowed money.  The minimum size of a margin account is $2,000 cash, which the brokerage will loan you an additional $2,000 on top of.  The typical accounts are 2:1 so the brokerage will loan you up to the amount of cash you put in.  Minimum trade amount is $2,000.  Margin accounts cannot be used to buy stock in an initial IPO.  Individual stocks must cost at least $5 per share.  All trades must be made within the NYSE or NASDAQ markets, so no penny stocks.

Let’s say you put $2,500 into a margin account, the brokerage matches that amount and loans you an additional $2,500, giving you $5,000 to trade with.  You find a stock that is priced at $5 per share and purchase 1,000 shares.  Let’s say after a year the stock has doubled in price to $10 per share so your account now shows $10,000 in value.  You would then sell that stock and repay the loan with interest, assuming a 5% simple interest rate.  So you will owe the brokerage $2,500 in principle and $125 in interest.  Deduct the $2,500 you originally invested and you are left with a profit of $4,875.  Had you made the same investment with only the $2,500 you had in cash, you would have only profited $2,500.  So using a margin account in such cases will nearly double your profits.

The Downside:

Let’s say you make the same investment and the stock loses 1/2 it’s value.  So in this scenario, the stock is worth only $2.50 a share after a year.  Once you sell you have only $2,500 of the original $5,000 invest and you will still be required to pay the interest of $125 in addition to the principle of $2,500.  This would actually put you in the hole  by $125 because you had to pay back the loan with interest.  So while trading on a margin account can allow you to make more money, on the flip side, you can lose more than you invest.

The Complications:

Day trading margin accounts work a little differently than traditional margin accounts.  Day traders have a minimum deposit of $25,000 cash which is considered a “maintenance margin.”  Every dollar in excess of the maintenance margin can receive a loan at a maximum rate of 4:1 so a cash deposit of $35,000 will give you $40,000 ($10,000 x 4) in buying power.  If your account drops below $25,000 in cash, there are penalties including a downgrade of your account.  All these amounts are federal minimums mandated by law and each brokerage may put stricter rules and higher minimums in place.

The Take-Home:

Stay away from margin accounts until you are well versed in the market.  I am an advocate for everyone getting involved in their investing and this is the best time in the history of the stock market for everyday people to get involved.  That being said, there are some tools and tricks that should be left to the professionals.

BITCOIN: I’m In!

Today, I read an interesting article about how JP Morgan is calling ETFs with exposure to Bitcoin the “Holy Grail” for both owners and investors.  There are several pieces to understand so let me touch on each one briefly.

First, ETFs are Exchange Traded Funds (follow the link for a full definition and explanation). These funds are similar to mutual funds but they do trade differently.  Mutual funds typically have only one real price per day, calculated at the end of the day after the markets close, which is also when your buy or sell order goes through.  ETFs’ prices fluctuate with the market; as their holdings rise and fall so does the price of the ETF.  They also trade like stocks and may be bought and sold within the same trading day.  They are traded just like stocks with a ticker on their respective exchange.  My favorite thing about ETFs is that they are already diversified, so when you buy one share you are actually buying a variety of different shares or commodities.

Bitcoin, along with most cryptocurrencies, are traded differently than traditional stocks.  In order to buy Bitcoin outright, you need a wallet at an exchange specifically for cryptocurrencies.  Banks have been cracking down on these transactions (Bank of America recently banned all cryptocurrency transactions).  This makes it much harder for the average investor (you and me) to get in on.  ETFs that hold cryptocurrency don’t have that barrier to entry since they are traded like any other stock in the market and you can buy them today with your brokerage account.

On a final note, trading ETFs is much safer than trading on cryptocurrency exchanges since every asset in your brokerage account is covered by federally mandated insurance.  This won’t protect you from the price of Bitcoin crashing, but it will protect you from fraud and theft that has plagued the crypto exchanges.

Through a few Google searches, I found 3 ETFs that have exposure to Bitcoin and had overall good reviews: ARKW, ARKK, and LIT.  I decided to go with ARKW because it had the highest concentration of Bitcoin-related investments with 7% of the investment being in a Bitcoin fund.  The images below show you how to find this info on Yahoo! Finance.

Search for the symbol you want, ARKW, select the “Holdings” tab and scroll down.

bc1

You will see the top 10 assets that are in this particular ETF.  Notice several of these stocks are already part of my portfolio.

BC2

2/14/2018
Now that I have found a fund to invest in, I made the following transactions within my E*Trade Brokerage account:

I sold all 1,270 shares of CVSI for $0.39 each, total cash from sale was $488.18
I sold all 1,500 shares of IGC for $0.79 each, total cash from sale was $1,177.84
I sold all 20,000 shares of MCOA for $0.03 each, total cash from sale was $590.65

The total net loss on these was $1,236.00. I decided it was better to get rid of the stocks that weren’t performing well and move into a fund I thought would do better.  I don’t like losing money but I’m learning when to cut my losses and this money has a better chance of growing in this new fund than in those cannabis stocks.

I bought 48 shares of ARKW for $49.6712 each, total cost was $2,391.17

 

Thanks for reading, please follow this blog!  Find us on Facebook & Twitter!!

Contributions & Dividends

Here’s a quick update on some transactions from late last week.

On 2/8/2018 I received $49.20 in dividends from LOW, paid in cash to my E*Trade Brokerage.

On 2/9/2018 I made the following contributions:
$105 to my IRA
$50 to my E*Trade Brokerage

 

Thoughts about last week:

By the end of the week, I had lost a little more than $2,000 in value, about 5% of my portfolio.  This was a rough week in the market, although this “correction” has been expected for a long time now.  My strategy at this time is to stay the course and ride the roller coaster.  I expect, along with most of the wall street analysis, that this is temporary and we should see all the recent losses erased within a few months.  For now, I will be hunting for bargains, I’ll let you know when I find the next one.

Happy trading!

Price Alerts: How & Why to Use

Yahoo! Finance, Robinhood and other free services offer basic price alerts that tell you when a stock in your portfolio or watch list has a big change, up or down, on any given day.  This is a useful feature that keeps you informed of large swings in the market and your particular holdings.  Sometimes you want to know when a specific stock reaches a specific price.  In order to do this, the traditional brokerages like E*Trade, Ally, or TD Ameritrade offer much better alerts.

In this case I have found an interesting stock, The Container Store (TCS).  From the image below, you can tell from the previous year that this stock does not seem to be climbing in the long run but it does have some volatility.  Stocks that jump around a lot offer profitable opportunities.  TCS tends to fall to around $4 and then rises to between $5.50 and $6 per share every few months.  If I can buy at $4 and sell at $5.50 that is a 38% increase and as good as anyone can hope do to in the market!

alert

Once you find a stock like this (TCS is currently the only one I monitor) you can search for it within your brokerage’s dashboard.  Determine a price you want to be alerted about and set the alert.  It’s a simple process that the traditional brokerage with all their fees can afford to offer.  In this case, I’m using E*Trade because that is the brokerage I primarily use; the others are similar.

Right now I can’t locate a free service that offers an equivalent benefit.  Yahoo! Finance and Google Finance claim to be working on a free service but neither is available as I write this post.  Yahoo! used to, but disabled it in 2017 and has not put it back up.

 

Thanks for reading and happy trading!!

If you’re enjoying this information please follow the blog!  We are on Twitter and Facebook, too.

Stocks Falling = Buying Opportunity

2/8/2018

If you watched the market today you know it took another hit.  I was hoping to buy TCS yesterday when it dropped but I acted too slowly and missed my opportunity.  Today as the market started to slip I decided to look at a stock that has been climbing faster than any other stock since the beginning of the new year.  Netflix (NFLX) has been defying the odds for years and every time an analysis claims it will drop, it climbs.

NFLX

The chart above shows the price year-to-date (YTD).  As you can see, it started close to $200 and has climbed as high as $286, more than 40% since the beginning of the year!  I wanted to get some shares but not when the stock was on its way up, I like to buy when the stock is dropping and sell when the stock is gaining.  This was finally my opportunity to buy.

Large, powerful companies like Apple (APPL), Amazon, (AMZN), Facebook (FB) and Google (GOOG) don’t play by the same rules that relatively smaller companies like Rite-Aid (RAD) and United Airlines (UAL) do when it comes to stock price.  We have looked at PE ratios to buy the smaller ones; these larger ones are harder to judge.  So for NFLX we are speculating about future earning and its ability to continue its market domination.

We are a Netflix family and know first hand that they are constantly producing new content and are on the cutting edge of streaming technology.  Years ago, many predicted the demise of Netflix when they decided to separate their DVD mail service from their streaming service.  Today, I don’t know anyone who still uses the DVD service, Netflix was able to predict the future and has grown tremendously since then.  Every time I heard about another major innovation, I saw their price rise so quickly I thought there was no room left to grow.  Since buying Amazon (AMZN), its price has risen 40%, I believe that NFLX has the same potential and this market correction is the best buying opportunity I have seen in a while.

Both of the following transactions took place in my E*Trade Brokerage account:
I bought 5 shares of NFLX for $260.00 each, total cost of $1,306.95
I received $49.20 dividend paid in cash from the LOW stock

Trying to Pick Up the Rebound

2/7/2018

I received an alert on my phone this morning that The Container Store (TCS) had a price drop below $4.  I set up this alert on Yahoo! Finance, I’ll show you how to set these up in a future post very soon.  I had very little cash to buy it, so I decided to sell a stock I already had in order to make the purchase.

TCS is a solid, low priced stock that I was planning to use for short-term gains.  While they consistently have a price between $4 – $6 per share, I decided it would be worth buying when it dropped because historical data told me it would recover.  The goal was to buy for around $4 and sell for about $5.50, giving me an increase of more than 30%.

I was pretty busy at work when the alert came in.  I got on my phone a few minutes after the alert and sold 665 shares of CBWTF for $1.57 each a total sale price of $1,036.99.  I had bought these shares at about $0.80 each, so I turned a nice profit.  Since I have begun investing in index funds with cannabis exposure, I decided to sell off some of the individual stocks when the opportunity presented itself and this seemed like a good time.

After the sales, I transfered $225 from my side hustle checking, basically all I had.  I submitted a limit order for 300 shares of TCS at a price of $4.25.  The price had dropped below $4 earlier but was at $4.35 when I placed the order.  I wanted to make sure I didn’t overpay for the stock.  Unfortunately for me the price never dropped back and the stock closed at $4.75 so I did not make a purchase.  The good news is, I had the right instinct but did not have the time to execute.

Heres a summary of today’s transactions:

Sold CBWTF for $1.57 per share, a total price of $1,036.99.
Transferred $225 in cash into E*Trade brokerage

I currently have $1,438.87 available for trading.  I will be on the hunt for a good purchase!

Thanks for reading & happy trading!
If you enjoy this blog please follow and like us on Facebook!