I've been meaning to call Questrade in order to reset my passwords and re-establish access as I haven't even looked at my accounts in quite a while now. I still receive the various client notices via email and that at least has kept me up to date with some of the new things that Questrade are doing.
New Inactivity Fee
One that had me a little concerned was the original idea of charging clients a $10 monthly inactivity fee unless there was at least one $4.95 commissionable transaction per month. That was to have been put into effect in July. They have since rescinded that idea and changed it to a quarterly fee of $20 and quarterly transaction requirement which doesn't kick in until until October.
All of this is moot if there is over $5,000 in combined assets in a client's accounts.
Due to my procrastination in calling, they called me. I got someone who knew what they were doing and looked after everything I needed as well as answered some basic questions regarding the new platforms and data fees. All in all they get a good grade for pro-active customer service.
I am looking forward to playing with the new IQ trading platform and browsing some of the new information that they have available.
Jeff.
Questrade, My direct access discount broker.
Wednesday, June 13, 2012
Tuesday, June 12, 2012
Consistent High Win Rates in Active Trading
I've lost count of how many times I have started this post only to lose sight of what I was trying to convey. So I started over with the same basic idea, just a slightly different direction and frame of mind and removed all the technical crap.
I pulled out my most promising trading strategy a few weeks ago for some reviewing, which was the gist of what I was trying to get at. I used the same list of stocks that I had selected then, about two years ago, and reviewed all of the entry and exit ideas with updated charts to reflect current activity. Not much has changed. The performance of the strategy has remained relatively steady with win rates that are not only consistent, but quite respectable. I am not surprised as the strategy is simple enough that it eliminates the subjective decision making and turns the trading into a strictly cold, hard, rules based operation. In fact, the older trades that I looked back on were easily duplicated without any reference to the annotated charts and without any real thought or tough analysis.
I succumbed to the lure of instant gratification as I overlooked many of my trading plans, from the simple to the overly complicated, in favour of the faster moving day trading. I have taken a break from trading directly and have managed to refocus on what my goals are with a view to a longer timeline for trading.
Over the next few posts I will post some of the comparative results of my updated studies. I am even going to use some random stock selections and put my plan to the test to see how versatile it can be overall. I doubt that I will outline my entire plan as, like so many other ideas available online, they are not likely to be taken too seriously anyway. In the same vein as the rest of my blog, this is aimed mainly at tracking my own learning curve.
Jeff.
I pulled out my most promising trading strategy a few weeks ago for some reviewing, which was the gist of what I was trying to get at. I used the same list of stocks that I had selected then, about two years ago, and reviewed all of the entry and exit ideas with updated charts to reflect current activity. Not much has changed. The performance of the strategy has remained relatively steady with win rates that are not only consistent, but quite respectable. I am not surprised as the strategy is simple enough that it eliminates the subjective decision making and turns the trading into a strictly cold, hard, rules based operation. In fact, the older trades that I looked back on were easily duplicated without any reference to the annotated charts and without any real thought or tough analysis.
I succumbed to the lure of instant gratification as I overlooked many of my trading plans, from the simple to the overly complicated, in favour of the faster moving day trading. I have taken a break from trading directly and have managed to refocus on what my goals are with a view to a longer timeline for trading.
Over the next few posts I will post some of the comparative results of my updated studies. I am even going to use some random stock selections and put my plan to the test to see how versatile it can be overall. I doubt that I will outline my entire plan as, like so many other ideas available online, they are not likely to be taken too seriously anyway. In the same vein as the rest of my blog, this is aimed mainly at tracking my own learning curve.
Jeff.
Monday, February 20, 2012
BMO Chart Followup
Here is a chart of Bank of Montreal (BMO) for the period that I wrote about in my last blog entry.
I bought my first share, as I mentioned, in January, 2008. Since then the price took a bit of a dive but has stabilized nicely.
If I were actively trading this one I would probably be sitting aside, but seeing as it is a DRIP there is no selling. Also, DRIP investment uses far less charting, in fact almost none, other than to do some tracking. Even then most people don't follow the prices of the stocks in any way other than to determine how much to send in for the OCP.
In the case of BMO, it was a no-brainer first choice. Right from their own investor dividend page:
"BMO Financial Group is the longest-running dividend-paying company in Canada. BMO’s policy is to pay out 45% to 55% of its earnings in dividends to shareholders over time."
This is one of the primary indicators to buy into a DRIP, longevity in dividend payments and stability in the fact that they have been around for a long time. Another factor is a history of increasing dividend amounts over time and a discount to buy shares with the re-invested dividends, 2% in BMO's case and they allow for up to 5% in the prospectus..
I'll get into my other holdings later.
Jeff.
I bought my first share, as I mentioned, in January, 2008. Since then the price took a bit of a dive but has stabilized nicely.
If I were actively trading this one I would probably be sitting aside, but seeing as it is a DRIP there is no selling. Also, DRIP investment uses far less charting, in fact almost none, other than to do some tracking. Even then most people don't follow the prices of the stocks in any way other than to determine how much to send in for the OCP.
In the case of BMO, it was a no-brainer first choice. Right from their own investor dividend page:
"BMO Financial Group is the longest-running dividend-paying company in Canada. BMO’s policy is to pay out 45% to 55% of its earnings in dividends to shareholders over time."
This is one of the primary indicators to buy into a DRIP, longevity in dividend payments and stability in the fact that they have been around for a long time. Another factor is a history of increasing dividend amounts over time and a discount to buy shares with the re-invested dividends, 2% in BMO's case and they allow for up to 5% in the prospectus..
I'll get into my other holdings later.
Jeff.
BMO DRIP, the Real Deal
When I go into a book store to buy a book, or just to browse, I have a tendency to end up buying the first book that I pick up. As often as not, it ends up being the book that I seemed to need at the time even if it was not the book I went in for.
As it turns out, my trading plans could have been handled in the same manner. Although unlike books, where I know what the other books have to offer, trading plans are not so predictable... I just had to try them all.
My original was the Dividend Re-Investment Plan plan. I had charted long term growth potential based on a few presumptions, forecast best and worst case scenarios and plotted everything for over 30 year periods. The goal was not to create a profit through capital gains, although that would be nice as well, but to produce an income stream based on dividends and eventually through incremental dissolution of the shares if needed. This requires patience and a dogged determination to continually contribute to the plan as it is a long term retirement strategy.
I still have my original holdings for all of the DRIPs that I started, the first being Bank of Montreal, (BMO). In January of 2008 I bought my initial share and promptly sent in my first Optional Cash Payment (OCP) cheque for $300 and registered for the DRIP.
Now that I have some data from this DRIP I can go back and do a performance comparison, which I will do for all of my companies eventually.
My rules were simple. Contribute $300 per month into at least one of the company DRIP plans. Usually the company will purchase shares on my behalf once per month, but plans vary in when this is done. In all cases they use a particular closing figure for the cost and in some cases they may discount re-investment purchases by as much as 5%, (BMO is currently 2%). In order to produce a best and worst case scenario I took the monthly share prices and applied them to my purchase spreadsheet twice. Once was to use only the low values and the other was to use only the high values.
Keep in mind that an active trading plan involves buying and selling where the worst case assumes buying high and selling low which produces a loss right away... even buying and selling at break even eventually erodes the trading account due to arbitrage and commissions. There must be many trades that profit either more frequently than loose or profit much larger than the losing trades. It's not easy to stick to a plan in those cases.
Here is a chart showing the effectiveness of both the best and worst case scenarios for BMO over the last four years.
In an active trading plan the worst case is that all the initial money is lost. In the case of this DRIP, the worst case is a 10% variance in the un-realized gain of the plan overall. This gain is not the primary goal. The real difference is in the regular recurring dividend payments or yield. The overall difference in yields vary by less than 3% (21.4% difference in yields) and the current payment varies by 0.25% (18.1% difference in yields).
It would be reasonably safe to assume that the result would be somewhere in between these two results.
Considering the long term span of this sort of plan it isn't difficult to extrapolate 30 years of similar data. Assuming worst case from above and the current payment of $204 per quarter that is generated after 4 years and applying some simple linear math, the payment could easily be $1,500 per quarter ($6,000 per year). The thing is that this is not a simple continuance as the shares, OCPs and re-investments build on themselves in a non-linear fashion.
Jeff.
As it turns out, my trading plans could have been handled in the same manner. Although unlike books, where I know what the other books have to offer, trading plans are not so predictable... I just had to try them all.
My original was the Dividend Re-Investment Plan plan. I had charted long term growth potential based on a few presumptions, forecast best and worst case scenarios and plotted everything for over 30 year periods. The goal was not to create a profit through capital gains, although that would be nice as well, but to produce an income stream based on dividends and eventually through incremental dissolution of the shares if needed. This requires patience and a dogged determination to continually contribute to the plan as it is a long term retirement strategy.
I still have my original holdings for all of the DRIPs that I started, the first being Bank of Montreal, (BMO). In January of 2008 I bought my initial share and promptly sent in my first Optional Cash Payment (OCP) cheque for $300 and registered for the DRIP.
Now that I have some data from this DRIP I can go back and do a performance comparison, which I will do for all of my companies eventually.
My rules were simple. Contribute $300 per month into at least one of the company DRIP plans. Usually the company will purchase shares on my behalf once per month, but plans vary in when this is done. In all cases they use a particular closing figure for the cost and in some cases they may discount re-investment purchases by as much as 5%, (BMO is currently 2%). In order to produce a best and worst case scenario I took the monthly share prices and applied them to my purchase spreadsheet twice. Once was to use only the low values and the other was to use only the high values.
Keep in mind that an active trading plan involves buying and selling where the worst case assumes buying high and selling low which produces a loss right away... even buying and selling at break even eventually erodes the trading account due to arbitrage and commissions. There must be many trades that profit either more frequently than loose or profit much larger than the losing trades. It's not easy to stick to a plan in those cases.
Here is a chart showing the effectiveness of both the best and worst case scenarios for BMO over the last four years.
In an active trading plan the worst case is that all the initial money is lost. In the case of this DRIP, the worst case is a 10% variance in the un-realized gain of the plan overall. This gain is not the primary goal. The real difference is in the regular recurring dividend payments or yield. The overall difference in yields vary by less than 3% (21.4% difference in yields) and the current payment varies by 0.25% (18.1% difference in yields).
It would be reasonably safe to assume that the result would be somewhere in between these two results.
Considering the long term span of this sort of plan it isn't difficult to extrapolate 30 years of similar data. Assuming worst case from above and the current payment of $204 per quarter that is generated after 4 years and applying some simple linear math, the payment could easily be $1,500 per quarter ($6,000 per year). The thing is that this is not a simple continuance as the shares, OCPs and re-investments build on themselves in a non-linear fashion.
Jeff.
Friday, January 6, 2012
Another case for DRIPping
I went back and set up a screen to choose a small handful of stocks with a tight enough set of criteria that only 28 made the list. The main items were that they had a 5% dividend yield or higher and a few other price, volume minimums. I did look for stocks that had their 50SMA higher than their 200SMA and the price had to be above the 200SMA. These were really just to get a small list rather than looking specifically for any performance, I could have just as easily reversed the technical items and and come up with a list that worked just as well.
A good number of the candidates were of the AAPL, BIP and D variety, trending up since early 2009 but some were not. I chose the very first one that bucked the trend and that had over three years of history... Exelon Corp (EXC).
Here is the chart:
Using the same $1,000 per quarter investment and just going with buying based on the last trading day of the month before the record date, the vertical green lines.
If there were no dividend this would be not so great, total ROI is in the red by 3.25%, which is better than it was in 2010 but the timing of when I might need my money might correspond with a down time, and that would suck. This is the main issue that I initially had with DRIPs.
With dividends included and re-investment applied as per the DRIP, the results are as follows:
Adjusted Cost Base (ACB) = $42.44
Total invested = $12,000 (302 shares)
Current price = $41.11
Total value = $12,431
Total gains (on paper) = $431or 3.6%
Final dividend payout = $145.04
Dividend Re-Investment Plans are for long term investing with no real eye toward selling. As much as this goes against my desire to continue with an active trading plan, I definitely see the advantage in this lethargic style of investing. The only investments that I have right now are of this type, which says a lot for DRIPs in the first place. It was the first investment strategy that I investigated and, while it may not be the last, it certainly will stand the test of longevity in my books as i don;t plan on closing out my DRIPs. In hindsight I do see that I could have benefited by shutting down my trading at it's peak and shifted my cash into these instead. Of course, the peak is not always attained in any trade or plan, hindsight as it is.
Being that I am in Canada, I suppose that I should do this same study with Canadian stocks, or at least those that have a Canadian stock offering. The tax implications are easier to handle as is the acquisition of the starter stocks for the DRIP... which I haven't even mentioned here. There just aren't as many offerings in Canada as in the US.
Jeff.
A good number of the candidates were of the AAPL, BIP and D variety, trending up since early 2009 but some were not. I chose the very first one that bucked the trend and that had over three years of history... Exelon Corp (EXC).
Here is the chart:
Using the same $1,000 per quarter investment and just going with buying based on the last trading day of the month before the record date, the vertical green lines.
If there were no dividend this would be not so great, total ROI is in the red by 3.25%, which is better than it was in 2010 but the timing of when I might need my money might correspond with a down time, and that would suck. This is the main issue that I initially had with DRIPs.
With dividends included and re-investment applied as per the DRIP, the results are as follows:
Adjusted Cost Base (ACB) = $42.44
Total invested = $12,000 (302 shares)
Current price = $41.11
Total value = $12,431
Total gains (on paper) = $431or 3.6%
Final dividend payout = $145.04
Dividend Re-Investment Plans are for long term investing with no real eye toward selling. As much as this goes against my desire to continue with an active trading plan, I definitely see the advantage in this lethargic style of investing. The only investments that I have right now are of this type, which says a lot for DRIPs in the first place. It was the first investment strategy that I investigated and, while it may not be the last, it certainly will stand the test of longevity in my books as i don;t plan on closing out my DRIPs. In hindsight I do see that I could have benefited by shutting down my trading at it's peak and shifted my cash into these instead. Of course, the peak is not always attained in any trade or plan, hindsight as it is.
Being that I am in Canada, I suppose that I should do this same study with Canadian stocks, or at least those that have a Canadian stock offering. The tax implications are easier to handle as is the acquisition of the starter stocks for the DRIP... which I haven't even mentioned here. There just aren't as many offerings in Canada as in the US.
Jeff.
Thursday, January 5, 2012
BIP, Other Stocks Trending, the DRIP still shines
I am making a little point in that the AAPL was no "one hit wonder" and there are many more stocks that did the exact same thing. In that case choosing trades was fairly easy as any decent company was hitting a trend around the same time, which makes for a great trading environment as long as the total account is positioned with the possibility of a change in the trend being covered.
Brookfield Infrastructure Partners, (BIP)
I annotated the chart and it pretty much says it all:
Buying and selling according to the chart without regard to any dividends using $1,000 trade sizes yields a 21.2% profit, about $843.
Back to dividend re-investment I noted the next chart two ways, one for straight timed buying to be just ahead of the record dates and opportunity buying. Opportunity buying consists of considering buying anytime in the 30 days prior to the record dates if the price is under the 50 or 200 SMA lines.
Timed buying: Opportunity Buying:
Adjusted Cost Base (ACB) = $17.60
Total invested = $10,000 (590 shares) 614 shares
Current price = $28.17
Total value = $16,640 $17,305
Capital gains (on paper) = $6,640or 66.4% $7,305 or 73%
Final dividend payout = $71.22 $73.79
Basically, either method works well so I might split the difference between them. The thing about opportunity buying is that sending in a cheque to buy through the DRIP leaves the timing up to the processing department at the transfer agent... which means timing is not great. There is some return lost as a result of true timing using a broker as there are commissions and even share purchases with a synthetic DRIP (no partial shares counted).
Jeff.
Brookfield Infrastructure Partners, (BIP)
I annotated the chart and it pretty much says it all:
Buying and selling according to the chart without regard to any dividends using $1,000 trade sizes yields a 21.2% profit, about $843.
Back to dividend re-investment I noted the next chart two ways, one for straight timed buying to be just ahead of the record dates and opportunity buying. Opportunity buying consists of considering buying anytime in the 30 days prior to the record dates if the price is under the 50 or 200 SMA lines.
Timed buying: Opportunity Buying:
Adjusted Cost Base (ACB) = $17.60
Total invested = $10,000 (590 shares) 614 shares
Current price = $28.17
Total value = $16,640 $17,305
Capital gains (on paper) = $6,640or 66.4% $7,305 or 73%
Final dividend payout = $71.22 $73.79
Basically, either method works well so I might split the difference between them. The thing about opportunity buying is that sending in a cheque to buy through the DRIP leaves the timing up to the processing department at the transfer agent... which means timing is not great. There is some return lost as a result of true timing using a broker as there are commissions and even share purchases with a synthetic DRIP (no partial shares counted).
Jeff.
Subscribe to:
Comments (Atom)
