Why this top trader follows the ‘money flow’
Monday, 14 October 2019
By Bernd Struben
- From friction to love fest
- In the mailbag…options trading
- Rare Earth Stocks Get a Boost
‘Dealing with risk and uncertainty is a trader’s lot in life.’
Ryan Dinse, Billion Dollar Breakout Trader
Over the weekend you should have received an email from our editorial director, Greg Canavan.
That’s to let you know about the three part video interview series he just conducted with Ryan Dinse.
You’re likely familiar with Ryan.
Along with Sam Volkering, he’s our resident crypto investing guru. He also spearheads one of Port Phillip Publishing’s top small-cap stock trading services, Billion Dollar Breakout Trader.
Now Ryan has a long and successful history in the investment world. One going back almost 20 years as an analyst, a financial advisor and a trader. But I won’t delve into his background here.
What’s far more important is Ryan’s trading track record. In fact, Greg says the returns on Ryan’s trades have even made him ‘a little jealous’.
So what kinds of returns are we talking about?
As of Friday, every one of Ryan’s 11 open trades was in the black.
The worst performer is up a mere 4.00%. Though it’s achieved that gain in just over one month, since 11 September.
The best performer is up a whopping 400.00%. Ryan tipped that trade on 18 March.
All up, if you’d bought an equal value of shares in each of the 11 open trades, you’d be sitting on a gain of 73.16%. And all but one of those trade recommendations was made in 2019.
In case you’re wondering, the oldest open trade stems from 7 October 2018. That’s currently showing a gain of 103.00%.
With a smashing track record like this, you can see why Greg was eager to get Ryan in front of the cameras to garner some insight on his winning strategy. Not to mention the trading philosophy that’s enabled Ryan to achieve these kinds of returns.
As Ryan says, ‘It’s not all about the profit making equation. It’s about managing your own psychology, too.’
The first of the free, three part video interview series is now available for you to watch. The next two instalments will be released tomorrow and Wednesday.
In today’s instalment, Ryan explains how he spent years asking the wrong question on small-cap stocks. Namely why a small-cap stock might see its share price rocket higher.
The right question — the one he says you should be asking — is how a small-cap is likely to see its share price shoot higher.
The answer to that question has to do with something Ryan calls money flow.
He and Greg explore that in greater detail in today’s video interview.
You can watch that, for free, by clicking here.
From friction to love fest
In Donald Trump’s world — which, like it or not, is your world too — things move quickly. The ‘master of the deal’, after all, prides himself on his unpredictability.
This was on full display on Friday (Saturday Aussie time), when the latest round of trade talks with China wound up.
Just weeks ago Trump tweeted, ‘We don’t need China and, frankly, would be far better off without them.’ But after negotiators achieved ‘phase one’ of a new trade deal to level the playing field, Trump whistled a different tune.
‘There was a lot of friction between the United States and China, and now it’s a love fest. That’s a good thing,’ Trump told reporters.
In case you’re unclear on who deserves the credit, Trump sent this clarifying tweet over the weekend, ‘The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country.’
The major stock indices around the globe — as you’ll see in the market roundup below — all enjoyed big gains on the news. While gold lost some of its haven asset lustre and sold off.
That may be premature.
‘Phase one’ of the new deal is a step forward. But it’s a baby step.
The US isn’t removing any of the tariffs already in place. And it may yet impose a fresh round of tariffs in December. Trump’s only concession was not to slap an additional 5% tariff on US$250 billion of Chinese exports, meant to go into effect this week.
As for the Chinese? They agreed to up their imports of US agricultural products by US$50 billion. Though no progress was reported on China’s long running practice of intellectual property theft or its government funding for state owned enterprises.
All well and good for phase one.
But as an investor it’s important to remember we’ve been down this road before. One step forward…two steps back.
Disagreements can sometimes be solved in their early stages. But wars tend to be fought to the bitter end. It isn’t until one side is pushed to — or over — the edge that real capitulations are made.
I still believe the US holds the stronger hand in this trade war over the longer term. That means Xi Jinping will have little choice but to make some far deeper concessions…eventually. But we’re not there yet.
Now, to the markets…
Over the weekend, the Dow Jones Industrial Average closed up 319.92 points, or 1.21%.
The S&P 500 closed up 32.14 points, or 1.29%.
In Europe the Euro Stoxx 50 index closed up 75.96 points, or 2.17%. Meanwhile, the FTSE 100 gained 0.84% and Germany’s DAX closed up 347.85 points, or 2.86%.
In Asian markets Japan’s Nikkei 225 is up 246.89 points, or 1.15%. China’s CSI 300 is up 1.54%.
In Australia, the S&P/ASX 200 is up 43.89 points, or 0.66%.
West Texas Intermediate crude oil is US$54.75 per barrel. Brent crude is US$60.56 per barrel.
Turning to gold, the yellow metal is trading for US$1,483.49 (AU$2,183.21) per troy ounce. Silver is US$17.48 (AU$25.73) per troy ounce.
One bitcoin is worth US$8,281.40.
The Aussie dollar is worth 67.95 US cents.
In the mailbag…options trading
In Thursday’s Port Phillip Insider, guest editor Matt Hibbard explored an income generating strategy for today’s ultra-low interest rate world. A world where volatility in the stock markets is also running high.
As a long term options trader, Matt suggests writing options on stocks. The goal here is for those options to expire worthless. Then you get to keep the premium…generating much needed income.
But, as reader Steve points out, high fees can take a big chunk out of that income:
‘Matt Hibbard wrote an interesting piece on options trading today. Whilst it does work and I have done it on and off for years, the biggest problem, and the thing that stops me doing it more often, is fees. Commsec charge $34.95, which can amount to a huge percentage of the premium especially when volatility is low. I know Options Express offer cheaper premiums, but there is the problem of settlement if the option is exercised (in the case of a covered call or naked put). I currently use Commsec out of convenience as it’s where I purchase all my shares, have bank accounts etc.
‘Any suggestions on how to trade on lower fees and overcome those issues I outlined above?’
Thanks for writing in Steve. While I’m certified to offer general financial advice on options and derivatives, I’m no expert. So I kicked your question over to Matt.
Here’s his reply:
‘You’ve touched on something that is one of the frustrations in Australia for options traders. The $34.95 you mention is the going rate, whether you trade a few option contracts or hundreds of them. As you say, it can take a big chunk out of the return on your trade.
‘Full service brokers in Australia can even charge much more than this. Some charge $100 per leg, irrespective of the size of your trade. My guess is that they only want to deal with big-ticket clients.
‘Compare that to the US, and I’m afraid it won’t make you feel any better. TD Ameritrade charge $6.95 per trade, plus 75 cents per contract. Others charge a flat fee of around $4 to $5, plus around 50 to 60 cents per contract. Online brokers there will also throw in a bunch of free trades to get you started.
‘That’s not to say you can’t make a decent return in the Australian market. You just might have to allocate more capital per trade to make it worthwhile.
‘At Options Trader, we’ve found that you need to allocate around $5,000–6,000 of capital per trade to generate a decent return. However, there are plenty of members who trade much bigger positions than this, so brokerage becomes less of an issue.
‘With the increase in volatility we are seeing at the moment, at least option premiums are increasing in size. But, unfortunately, no luck with a reduction in brokerage for now.’
There you have it. A $34.95 flat fee on a small trade is going to bleed you dry. But up that trade to $6,000 or more and the broker gets a much smaller slice of your income pie.
Perhaps the ongoing fintech revolution will finally see fees in Australia drop to US levels. A bit more competition can do wonders for excessive prices.
Of course, it’s not just options trading that’s cheaper in the US.
Aussies also tend to pay more than twice as much for our alcohol, tobacco, petrol and electricity — to name a few — as our American mates.
But then those are all sinful consumption items anyway, right?
Remember to send your questions and feedback to firstname.lastname@example.org.
Rare earths stock trading tips
As part of Port Phillip Insider’s regular new Monday feature, below you’ll find the latest trading insights from market veteran Murray Dawes.
In his premium trading service, Alpha Wave Trader, Murray uses his proprietary ‘slingshot method’ to focus on one thing — and one thing only — in the stock markets. Extracting huge profits from stocks…as fast as he can.
Today he looks into the rare earths stocks most likely to benefit from a US–Australian agreement to support new production of these critical base elements.
You can scroll down and click on the image below to watch Murray’s latest video now.
To learn more about what Murray offers over at Alpha Wave Trader click here.
Rare Earth Stocks Get a Boost
[Click on the picture to watch Murray analyse his two favourite picks in the rare earth sector that could benefit from an upcoming agreement between the US and Australian governments.]
The news last week that the Australian and US governments are discussing the potential to support rare earth projects in Australia to diversify rare earth supply away from China could put a rocket under a few stocks.
Developing rare earth projects is an incredibly expensive business. There are a few projects that are slowly advancing, but the big sticking point for all of them is how they are going to finance themselves into production.
Arafura Resources Ltd [ASX:ARU] has a market cap under $100 million but is looking for over a billion dollars to complete their project. Hastings Technology Metals Ltd [ASX:HAS] needs $427 million to get their project off the ground and their market cap sits around $160 million. There are other projects that are well advanced, such as Northern Minerals Ltd [ASX:NTU] and Greenland Minerals and Energy Ltd [ASX:GGG]. But today I wanted to focus on Australian domiciled projects with the strongest technical analysis set ups, and ARU and HAS are at the top of the list.
Both companies are in recovery mode after many years of shaking out long suffering investors. I think the technical picture in both stocks is finally starting to look quite compelling. They have both had quarterly buy pivots from the buy zone of major waves. If you don’t understand what that means, all you need to do is click on the picture above to watch a quick video where I show you my charts and explain the technical set up of both stocks in detail.
Trading stocks such as these is high risk, so I use my technical analysis model to help me find entry points where I’m confident I have a good chance of reaching my initial target quickly, so I can become free carried. From that point on I can relax because it means I will either breakeven or make money on the trade. Even if I want to be a long-term investor in a stock, I will use these trading techniques to lower my risk. Once part-profit has been taken, my stress disappears and I can focus on looking for other opportunities rather than fretting over every move up and down in the stock.
You can learn these techniques too if you tune in each Monday to my ‘Week Ahead’ video series.
Editor, Alpha Wave Trader