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Learning to Trade On Your Own – Discount Brokerage Educational Resources

discount brokerage education

Learning Objective – Discount Brokerage Education Resources:

  • To understand the different educational resources currently being offered by Canadian discount brokerages

Introduction

Increasingly, Canadian discount brokerages have begun to recognize that retail investors require tools and resources in order to support them in managing their own trading activities.  Fortunately for retail investors, the quality and diversity of resources is improving.  While some discount brokerages have very basic resources, such as glossaries of key terms that count as their “education” section, other discount brokerages, such as TD Waterhouse discount brokerage and Scotia iTrade, offer a number of investor education events both in person and online.

Types of “educational” content

The types of educational presentations that discount brokerages offer usually fall into the “informational” type or the “product orientation” type.  Sometimes there is a mix between the two types, where educational content is presented alongside a specific product, like a trading platform.  Often times, discount brokerages will open up events to existing clients as well as to non-clients in the hopes of being able to generate new business from those that attend the seminars, so be prepared for sales pitches or offers and promotions that are time-limited.  While there are times when you can land a great deal, it is wise to fully understand what you’re going to commit to before signing up on the spot.

Often, modules are presented by experienced teachers or partner organizations that work with a discount brokerage.  The topics presented can cover a wide variety of topics ranging from getting started with trading to more advanced strategies and techniques.   Most educational resources provided by discount brokerages today is geared towards beginners.  For that reason, some information and lessons are presented by staff members or business development associates that don’t have an in-depth background as a trader and/or teacher.  Be sure to ask about the background of the ‘instructor’ to gauge how well-versed they are in discussing the topic they’re presenting.

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Spot The Difference

Spot the differences in the image below. Answers at the bottom.

Spot The Difference

 

 

 

 

Answers:

  • owl hat
  • rays in sunshine
  • 2 blades of grass
  • top window of school
  • bell in tower
  • cloud
  • mirror on bus
  • apple
  • colour of girl
  • direction of second tree
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Event Review – Margin and Short Selling by TD Waterhouse Discount Brokerage

Short selling

This past August we attended several investor education events put on by TD Waterhouse Discount Brokerage.  These events were aimed at educating retail investors on the concepts, practices and strategies that will better prepare them when trading. The most recent session we attended was about margin and short selling.

The session covered a number of topics related to using margin including defining margin trading, trading account types, the benefits and risks involved in margin trading and ways of reducing that risk. Our main takeaways from the presentation on the subject of margin trading include:

  • Margin trading is leveraging assets you own or intend to buy
  • Leveraging is the degree to which an investor uses borrowed funds to purchase a security
  • Benefits include increased buying power, lower debt interest rate and the most interesting benefit of all, you can withdraw cash from your margin credit

Of course where there is a silver lining there is always a cloud. There are a few drawbacks to margin trading but the main one is that you can lose more than you invested. You can help mitigate some of these risks by not over-borrowing, diversifying across securities and sectors and having an exit and margin-call strategy.

Short selling was also covered in this presentation. Topics covered included the definition of short selling with examples, reasons to short sell, trading requirements in short selling, some potential risks and ways of reducing those risks. Our key takeaways for this section include:

  • Short selling requires borrowing a security from a broker in order to selling it, then buying back the security to return it to the broker.
  • Profits or losses are realized when shares are repurchased to return to the broker
  • Losses can be infinite in short selling as there is no limit on share price gain
  • Profits are capped as the share price will only go as low as zero

One can utilize the same strategies used for minimizing risks in margin accounts when short selling. These strategies include starting out small, diversifying investments and having an exit and margin-call strategy in place.

Overall the TD Waterhouse Discount Brokerage session on margin and short selling was informative. The presenter was knowledgeable and answered all questions asked throughout the presentation.

These types of education oriented events are a great opportunity to learn more about investing and trading, especially if you’re just starting out.  To find more educational events, check out our investor education calendar here.