Market orders, limit orders, stop-on-quote orders … what does it all mean?  In this episode, I start with the basics of order flow and execution: what happens behind the scenes when you buy or sell stocks and ETFs.  Then I go through the various order types, from simple to complex, to help you understand your choices.  You’ll get examples of situations where you might use one order type over another.

 

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Section 1: How Securities are Traded

Bid and ask prices

Market depth

Exchanges and other trading platforms

Order routing

National Best Bid and Offer (NBBO)

Price improvement

Brokers often get paid for order flow – is that fair or are we getting ripped off?


Section 2: Basic Orders and Conditions

Market orders

Limit orders

Conditions: All-or-nothing (AON), Fill or Kill, good ’till canceled (GTC), good ’till date (GTD), day orders, market on close (MOC), limit on close (LOC)

Stop orders

Stop-on-quote

Trailing stops


Section 3: Complex Orders

One Cancels Other (OCO)

One Cancels All (OCA)

Conditional orders

Pegged orders


 

References

Scottrade: Anatomy of an Order (PDF)

TD Ameritrade: Order Execution FAQ

SEC Investor Publication – Trade Execution


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Are you ready for the next financial crisis?  No one knows for sure when the crash will happen, but here are some sensible steps everyone should take to keep from being caught off-guard when it does.  I also tell you what signs to look for that will foreshadow the next crisis, so you can be calm and confident while others panic.

 

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Section 1: What Will the Next Crisis Be Like?

A brief review of the last few major financial crises

Signs and signals to watch for, this time around


Section 2: How to be Safe During Normal Times

Cash

Diversification

Alternative assets

Hard assets

Know your goals and risk tolerance, and keep your assets in alignment with them

Multiple income streams

Preparedness outside of the financial world


Section 3: Getting Defensive When Risk is Elevated

Move to a conservative asset allocation, as I have already done with my own assets

A little-known tactic to avoid getting trapped within your retirement account

Protecting a portfolio using options without selling the stock

What to sell

What not to buy


Section 4: What to do When the Crisis Arrives

From smoke to fire: The stages of a crisis, and the actions you should be taking in each

Embrace risk as others are becoming the most fearful of it

Follow trustworthy news sources; stay away from mainstream media as much as you can


References

Episode 15: How to Get a Return on Cash

Washington Post (April 2, 2007): Huge mortgage lender files for bankruptcy

The Survival Podcast – rational preparedness without the prepper mania

ZeroHedge – Why the Fed is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses

Battery1234 – Steven Harris’s website on how to make your own home battery bank for emergency power


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An Income Opportunity for the Long-Term


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Check out the video below, which is from my live stream for traders and active investors, to learn why I like Ford Motor Company (F).


 

As I explain in the video, Ford is the most forward-looking of the major automakers.  (Tesla is not a serious automaker yet – don’t believe all the hype.)  Ford has been willing to take a chance on future mobility technologies because their largest voting shareholder, the Ford family, understands that if a company doesn’t innovate, it dies.  The tech titans of the world, like Google and Apple, would love to sink their teeth into the auto industry.  And they are already trying to do it.

Wall Street has frowned upon Ford’s approach, so they’ve pushed the stock price down so far that the dividend yield has reached 5.3%.  Why?  Wall Street tends to have a “value-extraction” mindset instead of trying to build long-term value.  For instance, activist investors and private equity firms constantly push for more debt, buybacks, and acquisitions to drive short-term value.  They are less concerned with the company’s cash flows over a period of many years, and more concerned with rewarding companies like GM that churn out gas-guzzling trucks and SUVs with no regard for tomorrow.  But if you want to build wealth over your lifetime, like I do, you should love a company like Ford that has the courage to take control of its future instead of waiting until it is too late.   They have begun to transform Ford into a company that will not just build cars as we know them today, but will provide various forms of transportation that meet society’s needs in 2020 and beyond.  In February, they invested $1 billion into Argo AI, a startup focused on developing technology for self-driving vehicles.   Learn more about Ford’s initiatives around future mobility.

As with any investment, make sure to review the company’s annual report and other SEC filings to get a good understanding of the company before investing.  Pay particular attention to the disclosures of potential risks in those filings.  You can find investor info for Ford here.  Just because this company is right for me right now doesn’t mean it is necessarily right for you.

I own shares of Ford Motor Company as of the publishing of this post.  View other important disclaimers on this page.


Be Selective

Most stocks are priced at lofty valuations right now, so we’ve got to be selective.  While the bull market may last a bit longer, stocks whose values have grown out of line with their true cash flow potential will suffer a hard landing as deflationary pressures resume.  So, don’t just blindly buy the market index.

I’m still on the hunt for long-term portfolio holdings that can give me a reliable yield and are fairly valued or undervalued – so stay tuned for future Dividend Stock of the Month posts.

In case you missed it, here’s the last dividend stock I highlighted.  It’s had a nice run since I released the video!


The Torpedo Trading Live Stream

Watch more live streams like this at https://www.twitch.tv/torpedotrading and interact with me in real-time.  Follow the channel, and you can receive notifications when I go live.

If you miss a stream, highlight clips like this one can be found at my YouTube channel.


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Trading and investing are all about information: Accessing it, processing it, and turning it into an action that makes you money.  In this week’s episode, I go through my favorite learning tools, data sources, news providers, and more to help you locate the most beneficial info and toss out the rest.

 

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Section 1: Market News, Commentary, and Data

Newspapers: Wall Street Journal, Barron’s (subscription required to view articles)

Online: Reuters for high-quality reporting on breaking news

Television: Bloomberg TV

http://www.dailyspeculations.com/ – Vic Niederhoffer’s blog

Economic articles & blog posts: Financial Sense, Monetary Metals, Keith Weiner Economics, Armstrong Economics, Let’s Talk Bitcoin

Podcasts: Financial Sense Newshour

Live prices in various futures markets around the world at Marketwatch.com

Live currency cross rates

Calendar of economic data releases and other important events

Daily historical prices for stocks, ETFs, and indices: Google Finance and Yahoo Finance

Live prices and stock charts: TD Ameritrade, Scottrade, Fidelity, Google Finance and Yahoo Finance

Economic data series from the St. Louis Fed

Historical oil price data from the Energy Information Administration

Various data series that can be imported into R, SAS, Python, and other advanced statistical tools

Cryptocurrency price charts


Section 2: Learning Advanced Topics

For serious students, I still think books need to be a part of your study plan.  Here are my ten essential books for traders and investors.

Spreadsheet skills: Microsoft Excel courses on Lynda.com from LinkedIn

YouTube – here’s one of my favorite presenters of high-quality technical analysis

Live streamers on Twitch.tv – a very new but promising niche

Personalized instruction and coaching, customized to your goals


Section 3: Sources to Avoid

“Hot stocks” from email newsletters, pump-and-dump scammers, or social media groups

Poor-quality, overpriced garbage like Online Trading Academy – you’re paying $4,995 for what exactly??  Their obnoxious radio & junk-mail ad campaigns?

Instructors who promise massive returns overnight, turning $1k into $1M in three simple steps, etc.  Don’t get scammed.

Anything you use to get blind recommendations – always do your own diligence before making investments.


What are your favorite sources for news, commentary, data, and education?  Please share!  Leave a comment below.


Resources

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Today, I’ll present another simple strategy that new and experienced traders can use right away.  The idea here is to find stocks that have extended too far in one direction and are lined up for a short-term bounce or pullback.  I show you how to filter down a long list of potentially good setups into the ones that are most likely to succeed.

 

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Section 1: How to Setup Your Chart

  • Choose timeframe
  • Bar chart with OHLC (open-high-low-close)
  • How to read a bar chart
  • Green OHLC bar

Section 2: Support & Resistance Lines

  • How to spot a trend
  • Uptrend

    Uptrend: Moving averages in alignment

  • Drawing support & resistance lines
  • Slope
  • A trading range
  • Narrowing vs. expanding formations
  • Why it works
  • How to select the best setups

Section 3: Momentum Oscillators

  • What is momentum?
  • Overbought and oversold levels
  • My favorite momentum oscillators

Section 4: The Mean-Reversion Strategy

  • How to do it
  • Why it works
  • Momentum crossovers
  • How to select the best setups

Section 5: Trade Management Basics

  • Protective stops
  • Taking profits

Examples

Example 1 - Macy's (M)

Uptrend within a channel: 1 buy signal, 3 sell signals


Example 2: CMG

Price reaches major resistance level, and conditions extremely oversold: good short-term buying opportunity – but a tighter stop-loss would have been needed to preserve profits.


Example 3: T

Strong buy in AT&T signaled as price reaches long-term resistance AND prior support lines, along with highly oversold conditions


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A Long-Term Income Play in Korea, Available to US Investors!

 

Disclosure: I own shares of KT Corporation as of the date of this posting.

I’ve already got a Dividend Stock of the Month for May 2017, so I’m calling this my “Investment of the Week!”  But let me be clear, I intend for this to be a long-term investment.

In this video, I explain what this company does and why I selected it from a long list of dividend-paying stocks in the telecom sector.  The stock has gone up by about 5% in the two weeks since I released the video – so far, so good!

 


Shortly after I made this video, Moon Jae-In won the Korean presidential election.  As I anticipated, he is already talking tough on the chaebol conglomerates, one of which is KT Corp.  Should we be worried?  Just the opposite – we should be excited about this!

Korea’s chaebol are generally well-managed, conservatively-run companies that are built for survival over the long run.  What they lack are high dividend yields, big stock buybacks, or fully transparent management.  Therefore, many institutional investors have not given as much weight to Korean stocks in their portfolios as they should.

After the recent scandals involving Samsung’s Lee Jae-yong, impeached president Park Geun-hye, and others, the new President Moon finally has the momentum he needs to push for reform of these massive conglomerates.  The main goal of the reforms will to be to increase transparency, which will help these companies gain trust and attract more capital from abroad.  Sure, they’ll probably create some extra compliance costs for KT and other chaebol, but I expect that negative to be far outweighed by the benefits of more capital rolling in.  I think we’ll see the dividend payouts increase as part of this process too.  After all, KT is sitting on over $8 billion of cash.  In Korean won, that’s something like 88 zillion.  (Just kidding)  Note: Most Korean companies pay dividends annually, not quarterly, and they are variable from year-to-year.

Here’s another point I forgot to make during the video: Like many Korean companies, KT Corp is a good value relative to its earnings-per-share.  Here are the trailing and forward P/E ratios for KT Corp relative to its biggest peers in the US telecom sector, even after the recent rally (data from Yahoo Finance):

  • KT Corp: 12.6 trailing, 11.8 forward
  • AT&T (T): 18.7; 12.9
  • T-Mobile (TMUS): 34.7; 27.8
  • Verizon (VZ): 15.2; 11.8

As I always say, due your own due diligence before investing and don’t rely solely on my conclusions.  Other necessary disclaimers can be found on this page.

I’m still on the lookout for good quality dividend-paying stocks that can withstand market turmoil, so stay tuned to the live stream and YouTube channel to discover them.

 

 

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Today, I’ll present two simple trend-following strategies that new and experienced traders can use right away. I explain two easy methods for trend trading along with my top tips for profiting from these strategies.  I show you how to filter down a long list of potentially good setups into the ones that are most likely to succeed.

 

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Section 1: How to Setup Your Chart

  • Choose timeframe
  • Bar chart with OHLC (open-high-low-close)
  • How to read a bar chart
  • Green OHLC bar

Section 2: A Basic Pullback Strategy

  • How to spot a trend
  • Uptrend

    Uptrend: Moving averages in alignment

  • Trend persistency
  • Wait for a pullback
  • Trade entry
  • Why it works
  • How to select the best setups

Section 3: Moving Average Pullback Strategy

  • What is a moving average?
  • Which moving averages to select
  • Daylight
  • Trade entry
  • Moving average pullback example

Section 4: Trade Management Basics

  • Protective stops
  • Trailing stops
  • Taking profits

 


Resources

The Layman’s Guide to Trading Stocks, by Dave Landry

 

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Most 401(k) plans contain a variety of fund choices, so it can be hard to decide which ones to put your money into.  In this episode, I explain the best way to evaluate funds, separating the winners from the losers.  I also give my recommended asset allocations for the remainder of 2017, based on where we stand as of May.

 

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Section 1: Stock Funds

  • Domestic vs. international
  • Market cap (small/mid, or large)
  • Growth vs. value
  • Active vs. passive
  • Expense ratios

Section 2: Bond Funds & Fixed Income

  • Treasury bond funds
  • Corporate bond funds
  • Mixed bond funds
  • Bond fund duration: long-term, intermediate-term, short-term
  • Active vs. passive
  • Stable value funds
  • Money market funds

Section 3: Target Date Funds

  • How they work
  • Dangerously simple, and simply dangerous

Section 4: Alternative Funds

  • Commodities
  • Real estate
  • “Real value” funds
  • Should you invest in these?  When?

Section 5: My Target Long-Term Asset Allocation



Resources

401(k) statistics from the ICI

 

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Newsflash: If a financial advisor or fund manager brags to you about “beating the market”, it’s NOT what you want to be hearing right now!  In this episode, I debunk the popular myth that you should be trying to “beat the market” when times are good.  I also lay out the questions you must ask instead when evaluating a mutual fund or investment manager.  Don’t get caught chasing high-beta strategies after one of the longest bull markets in history has already unfolded.  Investing and trading are contests of endurance, not of raw speed.

 

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Section 1: Today’s Market in Historical Context

  • There are bull markets, bear markets, and range-bound markets
  • Long-term chart of the S&P 500


Section 2: The Unpleasant Truth: How Mutual Funds and Managers Beat their Benchmarks

  • Cherry-picking returns
  • Sketchy math
  • “Marking the close” – see Resources section below
  • Leverage
  • High-beta stocks
  • Illiquid portfolios
  • Lack of diversification
  • Asymmetric risk profiles
  • Very few: superior management
  • Focus on how they did during the more challenging years in the market
  • Size of fund: rapid growth can limit future opportunities

Section 3: The Questions to Ask Instead


Section 4: The Real Way to Beat the Market Over the Long-Term


Resources

Study: Mutual Fund Managers “Mark the Close” to Manipulate Quoted Returns

Mutual Funds & Performance Manipulation

 

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Keep a Defensive Stance, and Be Selective


Today, I’m releasing new asset allocation targets for long-term oriented investors of all ages, as well as active traders.    Remember, these are aimed at a general audience and are not personalized recommendations for any single investor.  Consider your own personal goals and risk tolerance when making your final selections.

I’ve made two updates recently.  First, I added a brand new asset class: Cryptocurrency.

Bitcoin, Ethidium, Litecoin, and other cryptocurrencies are exploding in popularity in 2017.  This is only the beginning of a long-term trend though.  We’ll see these digital currencies fully enter the mainstream over the coming decades.  For now, I’m suggesting only a small allocation, close to 1% of total assets.

Make sure to spread this allocation across a bunch of different digital currencies: at least 10 different ones, the more the better.  Keep the most in Bitcoin for its (relative) stability and wider acceptance, but include some investments in smaller ones too (known as “altcoin”).  The majority of “altcoins” will ultimately become worthless, I believe, due to their ease of creation – but you are looking to invest in a basket of many of them, so you end up with at least one that explodes in value (20x, 50x, or more) and dwarfs the losses in the ones that don’t pan out.  Altogether, don’t put any more than 2% of your assets into this area unless you carefully research it and you know what you are doing – don’t gamble with your money.  If you are closer to retirement or just a conservative investor, you might want to buy a tiny amount of Bitcoin (less than 0.5% of assets), let it sit, and just leave it at that.

Cryptocurrency carries many of the same benefits as precious metals (PMs), such as anonymity and preservation of purchasing power over the long-term.  Yet there are key differences, the most significant being the high degree of volatility in digital currency.  It’s still a very new market, therefore we can expect high volatility to continue but also tremendous potential for growth.  Wait for a bit of a pullback before investing, but don’t get FOMO (Fear of Missing Out).  It’s not too late to jump on board: cryptocurrency is the real deal and a legitimate asset class already.

For more information on cryptocurrency, check out Coinbase, where you can set up a digital wallet and make an investment, and Let’s Talk Bitcoin, where you’ll find links to a variety of podcasts and blogs about the subject.

The second update I made was to increase the allocation to real estate by a few percentage points.  Many investors will already have this much exposure to real estate through equity in their personal residence.  For those that don’t, REITs will get you there.  Listen to my introductory podcast on REITs to learn about this exciting asset class.  I also recently published a video on one of my favorite picks.  I’m careful to choose REITs that I think are most likely to maintain or grow their share price over the long term while paying a good dividend yield.  Stay away from most REITs in the health care, office building, and retail areas.

OK – now for the asset allocations.

If you’re a long-term oriented investor, making adjustments to your portfolio only a couple times each year, these are the baseline targets:


If you are an active trader, consider these allocations instead.  They’re based upon the long-term targets, but adjusted for my latest intermediate-term market outlook (6-18 month horizon).  These change much more frequently, as chart patterns emerge and develop.


You read that right: 0% to equities.  This is not the time to be reaching for dividend yield or jumping onto a trendy growth stock.  You can still keep some stocks in your portfolio, but put on some tactical short positions in the weakest areas of the market so that you’re market-neutral overall.  You might also consider preferred stock for the greater protection it provides, over common stock, but remain cautious because preferred stock will drop if we see a big downturn in the market.

Wealth-building is a marathon, not a sprint.  Staying defensive in a market like this one will keep your portfolio intact.  A big cash reserve will position you to leap on bargain prices when we see them.

Going forward, members of our community platform will receive updated asset allocations at least one week ahead of when I release them to the public blog.  Members will also get detailed sector-by-sector breakdowns within several of these asset classes (e.g. retail stocks vs. utilities, consumer staples, etc.).  Membership starts at only $5/month for the Bronze level.


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