Hello again everyone!

Another great weather week here is St Louis which is completely uncommon for July. I hope this new blog finds everyone doing well. Recently I ask through one of the threads for topics that you all would like to hear about. I have some great feedback and encourage you to post something if you have an idea about a blog topic. The title of the thread is "For Your Reading Pleasure" and is found in the Active Trader group. So here is the first one in response to FriscoTrader. I have asked my friend Dan from Trade-Ideas to provide some insight on why stocks gap at the open. Here is what he had to say. 

 

"One of the reasons that people have a hard time understanding why stocks gap up and down is because it is often forgotten that while the market in the US has defined market hours, it is open for pre and post market trading.  

For example, in pre-market trading a large institution may have a sell order for some size in a stock that does not trade too much.  That order is matched with another institutional buyer but because of the size of the order  the institution has to sell the price of the transaction is 1 point below the previous close.  The assumption is that if that trade went off during market hours that it might impact the stock even more so it is done in pre market and results in a last trade 1 point below the previous day’s close.  When other market participants see a trade like that go off they start to speculate in both directions and the result is a lot of pre-market volatility and volume, all before the average investor is awake.  The same can be said for a gap up.  There are often reasons to buy large blocks of stocks that seem to be for no reason, one common example is portfolio balancing.  This is done by large mutual funds and to make sure that risk is spread out in a matter that befits the market.  When a fund like Templeton rebalances its portfolios, the underlying stocks may gap up and down for what seems like no reason."

Thank you for the suggestion and please keep them coming. Have a great end of the week and weekend. 

Todd

 

Hello Everyone,

What an eventful few weeks we have had. In case you missed the notice, we will be in Chicago this weekend for a User Summit. As always, we are looking forward to this event. At the same time, the Cubs are playing my beloved Cardinals. Not sure how I am going to make that game yet but I am working on it.

At any rate, I know last week we saw an issue when we had to pull back a rollout scheduled for July 1st. I know this may have been an inconvenience for those of you that experienced layout problems. I am happy to say that this has now been corrected. A piece of this particular upgrade ran into an issue when we starting rolling into live production. Because of this, we had to make the decision to roll back. Luckily, we have a great development crew that was able to get everything back and ready for a rollout on Monday night. If you noticed an upgrade this morning, it was in response to feedback from this community. You should all be congratulated for helping out.

I hope you all find the new enhancements useful. We have added extended hours charting which was a major request for quite some time. The other major addition that came directly from  all of you, were adding Market Cap and Dividend Yield to all quoting windows. So you can now add these into a quote grid and full quote windows.

We continue to work to make the platform better for all of you and are always open to your suggestions. This rollout had several features and enhancements that came directly from this community and user summits.

I want to thank everyone for their continued support of ScottradeELITE. Please keep up the conversations with the Elite Deuxd and Elite Broker. Believe me, there is no more valuable feedback than that which comes from all of you.

I look forward to talking with you in the near future.

Thanks,
Todd 


(more)

Basically this is the Return on Equity (ROE). However, we may not be getting the full story if we only look at ROE: net income/shareholders equity. This number is important to all investors but can be misleading. Developed in the 1920’s, the Dupont Identity allows one to breakdown ROE into a more in-depth view and see what is going on within an organization. The Dupont Identity helps to see where the movements in ROE are coming from. ROE alone tells a story about rising or falling shareholder equity. The issue arises when equity rises based on nothing more than a possible increase in debt or other number crunching possibilities.

The Dupont analysis breaks down ROE into three key components: Profit Margin, Total Asset Turnover, and Equity Multiplier. Take a look here:

ROE=(Net Income/Total Revenue)*(Total Revenue/Total Assets)*(Total Assets/Shareholder Equity)

With a little algebra (WALA!), we see that canceling out like multipliers we are left with the basic ROE = Net Income/Shareholders Equity. So why do the more detailed formulas help?

• Net Income/Total Revenue = Profit Margin.  Profit Margin gives insight into how well a company is controlling cost. Basically, for every dollar in sales, what is the profit to the bottom line of the corporation. Looking at this in comparison with direct competitors explains which company is doing a better job in cost control. So if a company has increasing sales their ROE may rise, but their cost may be increasing at a much more alarming rate. With Profit Margin we can compare this across an entire sector. Total

• Revenue/Total Assets = Asset Turnover Ratio. Asset Turnover Ratio tells of the firm’s efficiency in using assets to increase sales. The higher this number the better. Total Assets/Shareholder Equity = Equity Multiplier.

• Equity Multiplier gives a measure on the leverage of the firm. Basically, how is the company financing their assets? The higher the number indicates they are using more debt to finance the assets on hand.
  

These numbers allow an understanding of how efficient a company is running. A firm’s ROE may possibly remain unchanged for a while but with this analysis it can be determined if they are truly maintaining a good position or if some underlying fact has changed.

In the end, this is just another tool for your arsenal. ROE can tell much about a company, but closer inspection can give you an edge you may have never known existed.

To find these pieces of information check out the Financials for each security in the Quotes and Research section of the website. Net Income and Total Revenue can be found on the Income Statement. Total Assets and Shareholder Equity can be found in the Balance Sheet.

Good luck and happy trading.

So I have taken way too long in getting a new blog out there. I have been very busy and have even had the chance to meet some of you at the ScottradeELITE User Summits. Things have been great lately. We are currently working on the next update for ScottradeELITE. With this next upgrade we will be implementing several of the suggestions that we have received from you in the community and during the User Summits. We will bring you more information about this rollout soon.

What has been going on with this market??? I thought I had a strategy figured out and then the whole thing turns on its side. Well, unfortunately we know that there are so many factors at play right now that we have to stay on top of everything all day. It has taken many long term strategies and really uprooted them. 

Am I suggesting becoming active day traders? No. Not if you are not comfortable with that level of activity. What I am suggesting though is to be active in monitoring your account. In this environment, one cannot afford to buy and then walk away. We are in times where one statement from the right/wrong, good/bad person can move the entire market. I guess what I encourage you to do is to observe what is going on everyday. If it makes sense to take some profit off the table, then do so. If it seems that the pain on a loss is too much, cut it and move on. 

I know this seems obvious, but sometimes it helps to remind us of the obvious thing to do. Anyway, I will be back soon with some new ideas for you. I hope all is well and will be talking to you very soon. 

Todd

(more)

Hello Everyone,

This week the volume is slow and everyone is getting ready for the holidays. I just wanted to take some time and wish everyone a safe and happy holiday season. I suppose we will see a few more downgrades today but hopefully it is setting us up for a better 2009. It has been a tough year but I believe it has made us all better. It has certainly taught me some lessons that I have already implemented in my trading. 

So here is my take away for the year that was: "History doesn't repeat itself, but it sure does rhyme." - Mark Twain. Look back over the year and what worked and more importantly what didn't work for your trading strategy in 2008. Apply the lessons learned to your gameplan strategy for 2009 and forward.

Let's all enjoy the holidays and get ready for what should be a better 2009. So to all you and yours, Happy Holidays!

Todd 

(more)

Scary part is that is not far from the truth. The auto industry is in turmoil in case you missed it. Then again how could we miss the headlines, they are all over the place. We can all look back at the situation that they find themselves and pinpoint so many blunders that it makes you wonder how they did not see this coming. I remember thinking years ago when the first round of 0% financing came out, that this was a very bad idea. The firms were sacrificing their future. As it turns out, I was right. We can all argue in here on whether they should be “bailed out” or not, but that really doesn’t matter for what we all care about personally…money.

How do we monetize the situation? There is a surplus of supply in the American market.  Sales are continuing to plummet. Are you willing to buy a car from a firm you are not sure will be here tomorrow? What stakes will the UAW try and take? What will the firms do with the money to ensure solvency? Is the amount being offered enough to even sustain the firm long enough to make a difference in the bottom line? I could go on and on.

These are the questions that everyone is looking for answers to. It has been a rough 10 years for the automakers and yet they have not shown any significant change to the structure. But maybe this is the stimulus they have needed to push them in the right direction. So again I ask, how do we monetize this situation?

Of the big three, we have to do some homework. I suggest using the Quotes and Research section on the website (also found via the research tab in Elite). Let’s dig in and find out who is in the best position. It is time to get fundamental here and “know” the company. Then, use the technical tools within charting to identify the emerging patterns. Take advantage to the volatility in the market. Picking up some 5-7% swings feels better than what the market has done to most individuals.

(more)

"Ring around the rosy, pocket full of posy, upstairs, downstairs, we all fall down..." or so goes the childhood chant. What is going on with this market? We gap up one day, followed by a gap down the next. Finding direction amidst all the noise in the market is growing increasingly difficult.

So let's get back to basics. Just an idea. Lately I have reduced my own screen more and more. I am a chartist. But I find myself looing more at company fundamentals than ever before. I still rely on my charting but I am starting to review the company for solvency. For this I am simply using the stock screener on the Scottrade website. Nothing elaborate, just some basics to show the company will not be seeking a governmental assistance in the near future. 

In my charts, I have dropped many of the indicators that were creating more confusion than they were helping see clearly. For my charts, I am still a ScottradeELITE loyalist. I look at 4 different time frames to look from a broad prospective and then narrow into the short term. Nothing flashy or fancy here, just your basics. 

This has helped me clear out some of the noise. Granted, in this market, the roar is still very loud. In the long run, I think we will all be better traders having endured this volatility and learning from the situations we may have never seen or seen only once. What are you doing to see through the noise these days? I am interested, as are your fellow community citizens, in your thoughts. 

Talk to you soon,

Todd

(more)

Good afternoon to all,

I hope everyone is doing well. The markets they are relentless. I can't wait for the day when things are back to the good ole bull market ways. The gut wrenching swings make for some quick trades but also a stomach full of ulcers. 

So I wanted to take a second and talk about "Hot Keys" inside ScottradeELITE. If you are looking for a faster way to place trades, check them out. If you go to the "System" menu, you will see "Hot Key Setup." Click on this and you will get a menu to choose to edit or add hot keys.Clicking on add will open the definition menu for your key. Choose to open certain tools or order entry. For example: if I choose stock order entry, I will then choose buy/sell, then quantity, then order type (market, limit, etc.), then duration and any qualifiers. Once I click "OK" I will be prompted to name the key. Choose either a function key at the top of your key board or use CONTROL or SHIFT plus any key on the key board. 

Now that the key is set, if you are looking at your chart and are ready to enter an order on the symbol you are researching, hit your hot key. This will send the order that you defined for the symbol that you are looking at. You can set up buy and sell orders to make the most efficient trading setup. 

Just another idea to store in your trading toolbox. If you have any questions, please let us know. 

Talk to you soon,

Todd

(more)

Well here we are. I am back from the Las Vegas Traders Expo. It was a great time and I was able to meet many Scottrade clients. While it is a different format than the User Summits that we have been doing, I was able to get some great feedback for future ScottradeELITE rollouts.

Don't look now but the markets are trying to rally. For me, I have learned much about my trading during these past few months of extreme volatility.

First, developing a game plan and sticking to it. There were a few times that I found myself holding on to something too long because of the way I felt about the trade. I have personally gone back to basics. Design a trading plan with specific rules and stick to them. Rules help eliminate some of the emotional aspect of trading. It helps take money off the table and also leave a position before it gets too far gone. 

Secondly, it has taught me a new way to look at the markets. Using sector based ETF's, it is easier to identify what arenas are heating up or cooling down. After developing a concept, there are ETF's that allow one to drill down even further into a particular sector. Past that, one could look all the way down into the individual stocks that are within that portfolio. 

Last. Trading with confidence. If you have a strategy, test it. More specifically, back test it. Is the trading strategy working as designed? If not...back to the drawing board. Tweak it, flip it or start over. Once the strategy results are to your liking, trade with confidence. 

Just some of my take-aways in the recent market turbulence. I hope all is well out there. Happy trading. Let me know if you have any feedback or questions for us. 

Todd

(more)

Hello Everyone,

"Hey, hey, my, my, the markets can never die. There's more to the picture than meets the eye." I believe that is a direct quote from Neil Young? Well, maybe he was talking about rock'n'roll. Anyway, these days have been crazy. Unnerving if you will. So how do we look at these things and make sense of what/where is going on?

Monitoring the entire market can be difficult. However, watching ETF's you can follow multiple sectors at once. For a great blog on ETF's in general, check out the Finance Professor's blogs for "Will ETFs rule the world?" There are ETF's that follow the different sectors of the market.

Using ScottradeELITE, you can create a symbol list containing ETF's that cover all the major sectors. Loading the list into your quote grid, you can then sort the list by any column heading of your choice. This will allow you to view the list according to information you find pertinent: %change, $change, volume, last, etc. Once you have identified a sector that interest you, dive in deeper. See what stocks make up that particular ETF.

So how do you find these ETF's? There are a few ways. You can use the ETF Screener that is available in the Quotes and Research section of the Scottrade trading website. Also available are www.amex.com and www.ishares.com.

Viewing ETF's allow you to see things from a broader perspective. Sometimes taking a step back allows us to get a better feeling for the ground that we dance upon. Once you feel comfortable with something you see, dive back in deeper to see what is happening in the details. Maybe it will help you make sense of all the market noise that we are hearing.

Sincerely,

Todd

(more)