Stock Trading – Entry 12

This new year holds a lot in store and since I am not glued to my computer looking at stocks all day, every day, let's do a quick review before I do a shallow dive in arbitrage.

Sell-out lines were the focus of my first entry of my stock trading journey. Have mine changed? Not really, although I have added a few. I do need to look at balancing/diversifying my portfolio a bit, so my attention will move to sectors and industries in which neither I nor my wife have any investments.

Getting seed money and creating a baseline were the steps I took in my second entry of my stock trading journey. I could consider another baseline to test performance in different market segments and I will aim to do that when my current one matures in less than two years. Why? I intend to built a diversified portfolio by then and at that point I will need to test that diversification (in terms of managed versus not). I don't have thousands invested here and there, remember? Only $360! I am currently building myself up to have a rich man's investing problems. That said, I have more seed money to invest, so I am on the prowl!

Tools were the focus of my third entry. Setting up my account at WealthSimple was easily done (use referral code 6FEFNA to give yourself a free $25). Also, I used a stock price calculator to determine my price range. Fortunately, I have more to invest, so I will be considering stocks with a price up to $1.20 CAD. I gotta make it easy to make a profit and by buying enough shares, the buy-sell fees need to be recouped with only a slight increase in stock price. This still allows me to buy and hold while making it easy to sell in the black (at a profit) if I really need to.

Outlining some basic indicators to help me weed out chaff was the focus of my fourth entry. These haven't changed and I will continue to look at floors on charts. My red flags haven't changed and I will still do a little Internet and market research before considering a purchase. In fact, I have already picked some stocks that have resulted in new interesting indicators that I will write about in my next entry or two.

In my fifth entry, I walked through an actual purchase I made with screenshots. I also observed one very important number I need to look at each time BEFORE I click 'buy'.

Taking a breather from regular stocks, my sixth entry has descriptions of the three most common blunders with investing in blockchains/cryptocurrencies that I encountered. What's better is outlining how I can avoid them in future. Lest I forget.

My seventh entry was where I differentiated between blockchains and IPOs. Also, I outline the steps I would take to invest in blockchains once I have a certain amount I can allocate towards this.

In my eighth entry I answered some questions about my stock trading journey. I will continue to be frank about my thoughts as I go, be honest about any affiliations, and not get into post-secondary studies in applied finance. Also, I will continue to only make any money off of readers without costing them anything (by simply reading these articles for free and referrals to tools I use). This is my online stock trading diary after all!

The ninth entry in my stock trading journey is based on a sharp wake up call I got one morning resulting in an immediate research dive into loaning and shorting stocks. As you can see in the image below, it's a free and easy way for any investor to randomly earn money on the side, even with only investing $360.

Following two earlier entries on blockchains, my tenth entry has my answers to some questions specific to blockchain investing. I have not forgotten the two questions that dispel greed in this article - even when it comes to trading regular stocks. Also, I am set with my crypto wallet when I want to have another go at investing directly into blockchains on Netcoins.

Rounding out 2023, I finished with one heck of an eleventh entry where I peeked behind the curtain of two gold-backed blockchains. Fortunately, the immediate fallout from the Battle of Waterloo taught me what I needed to know to analyse those blockchains, which I explained.

Now, as promised, here is a short dive into arbitrage and how it may one day make me some money.

With stock trading, I make money on the difference of buying and selling the same thing. Arbitrage is about the difference of buying and selling different things. The first time I was introduced to it was foreign currency exchange. In that context, the basic premise is would be for me to take my seed money and hop from one currency to another until I eventually land back to the currency I started, only with more if it than I had at the beginning. That's right, if I hop along the right bunny trail, arbitrage profits will come my way. Go the wrong way, and, well, I'll need to earn another $360!

The following are the basic steps that illustrates a situation where I can make money with currency exchange arbitrage (AKA forex trading):

1. start in currency A, then
2. use currency A to buy currency B, then
3. use currency B to buy currency C, then
4. use currency C to buy currency A, and then
5. stare at the screen wondering how I ended up with more money.

Why don't I do this all day? Well, I don't need a job staring at a computer screen looking for the tiniest glitch in currency exchange rates on a massive, live spreadsheet since I have a desk job already. I don't have thousands to invest in computer software to make calculated guesses for me (although expensive tools that make you money seem cool). I don't want to read what banks in many countries in the world are doing every morning before markets open given the alternative is seeing the sun rise.

As it turns out, currencies aren't the only things out there that can be bought and sold using different 'things'. According to this article, this can happen with mergers and acquisitions too, but how can you know in advance? Fortunately, some companies have managed funds (with management fees that are based on performance) that are geared for this kind of thing. For the moment, I will put this in my back pocket for when my investment choices are in the four- or five-figure range given the prices for those.

To find out what I will and won't pick for my next stock purchase and why, you can subscribe for free below so you can read future articles in my stock trading journey.