Undervalued Stocks Investing - Beginners Guide | Deeyana Angelo | Skillshare

Undervalued Stocks Investing - Beginners Guide

Deeyana Angelo, Derivatives Trader

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15 Lessons (1h 21m)
    • 1. INTRO to the course

      4:37
    • 2. Lesson 1

      10:39
    • 3. Lesson 2

      5:27
    • 4. Lesson 3

      7:18
    • 5. SECTION II Intro

      0:44
    • 6. Lesson 4

      3:57
    • 7. Lesson 5

      4:29
    • 8. Lesson 6

      2:27
    • 9. Lesson 7

      5:59
    • 10. Lesson 8

      11:29
    • 11. Lesson 9

      5:10
    • 12. SECTION 3 Intro

      0:51
    • 13. Lesson 10

      5:52
    • 14. Lesson 11

      3:46
    • 15. Lesson 12

      8:19

About This Class

Any novice investor usually starts from the seemingly obvious sources of information: Bloomberg TV and Financial Times articles.

However these 'sources' are about as useful as click-bait - written by journalists, not investors, all they provide is information overload.

Do you think Warren Buffett and George Soros listen to Bloomberg talking heads for their investment decisions? I guarantee you they DO NOT.

In this course you will learn about Value Investing through my own systematic process. I introduce every concept very gradually. This is a concise, but authentic course to get you investing in the stock market the right way.

Value investing is a low risk strategy used by many successful investors. I've spent the last 11 years as an active investor and a futures trader. All of my courses are based on my experience, knowledge and research for all these years that helped me find the most efficient way of capitalising from low risk opportunities across a number of asset classes.

Lectures are broken down into bite-sized chunks that are easy to digest. Aside from a couple of very easy calculations, you won't have to deal with clunky spreadsheets or complex equations.

Here is what you can expect:

✔ Understand sector research

✔ Use some basic fundamental data for initial stock picking process

✔ Combine market structures with candlestick patterns to time your investments - very powerful ability

✔ Develop a systematic skill to recognise the right time to buy

✔ Take advantage of market corrections to maximise your investment potential

✔ Use a couple of simple options strategies to further boost your income

PLEASE NOTE: This course is not a get-rich-quick scheme. You need to be prepared to put in the work. Skills required to become a good investor will not develop overnight. But when you take the right steps, you will get there much faster than someone learning through undirected trial and error.

If you want to move forward with your investing skills and growth your wealth the right way, enroll now.

Transcripts

1. INTRO to the course: this course is meant for people who want to start investing in stocks and shares. However, please know that this course is not about day trading strategies, because investing in stocks and day trading stocks are two very different activities. Day trading is an incredibly complex skill that requires the years and years to master properly because it's very sensitive to any inconsistencies than you may have. But long term investing. On the other hand, while it's still requires a certain level of skill, it's not nearly as complicated, plus the timeframes involved. And the end goes off the long term investor or quite a bit different than your average day trader goes. The main difference between a day trader and a long term investor is that the day trader is looking to outperform the underlying financial product, so they position themselves many times in a relatively short period over the same price range. Where as long term investors are looking for a decent entry price and from their own out, your investment will only be tracking the underlying price movements. As the price of stock moves up or down, so will your P and L. Your profit and loss But on the plus site, investors that own the stock outright get a dividend payment as well as creating that passive income that everyone strives for. With all this in mind, it becomes clear that the investors will need the skill to identify a good opportunity by looking to find an undervalued stock within a sector by doing sector research, looking at stuff like price to earnings, maybe price to earnings, to growth, estimating intrinsic values, which are all a part of the fundamental analysis that's already widely available on the Internet. So I'm not gonna be going too much into into these sort of things in detail, because, honestly, you can get this sort of information with a simple Google search. But the secret off being a really good investor is to make sure that not only fundamentals are in order but also the technically on the actual chart. The price is also located at a something called the Swing Extreme. I have a proprietary concept for systematically locating these swing extremes, which will also need to be followed by particular price events. They will give you the signal that it's, you know it's the right time to buy the stock. I will then also explain away to boost income further by using a technique known as ex dividend capture, which involves doing some simple option trades. And don't worry, there will be no complex equations in this course. You don't need to be awesome maths, and you certainly don't need to be a top level mathematician to make investing work for you . I've been day trading and investing for about 11 years now. Before that, I had nothing to do with finance. I was I was actually an extremely skilled session musician while I had a very high I. Q. I always found maths quite un interesting. So if you wanted to watch, you may give me pure equations to solve. It would like it would literally be my version of help. Now, over my years as a prop trader. One thing that did become quite obvious is that complex math is not necessary for investing or trading. In fact, I myself, when I am doing day trading on mainly a technical trader, I rely on order, flow and price action patterns for my short term position. And yes, there is a bit of math and bold when you know, especially these days, because I work in creating mechanical trading systems as well. But for the most part, when it comes to manual trading and long term investing, math is low priority, since the markets mainly rely on order, flow, supply and demand, and then also certain times a day and, of course, price action patterns. Therefore, I am staying true to my straightforward teaching style in this course as well, avoiding calculus wherever possible. I will mostly be focusing on teaching you how to find undervalued stocks through my own proprietary concept of Q points, which looks at existing swings in price, aiming to buy low and sell high in a very systematic way, with some reliance on developing price action patterns. 2. Lesson 1: if you intend to create a serious passive income from investing in stocks, I always advise people to choose a couple of stock sectors to specialize in when you're deciding when you're sectors. What you should be looking for is first and foremost the overall growth potential. Ideally, you're also looking for some sort of disruptive technology research products that may revolutionize a certain area off our lives off how we do things today. On a slightly lower level, you may want to investigate any interesting mergers with other, larger companies that could be just coming into focus. But obviously, by the time some of these mergers reached the regular population, it's likely already too late to invest. Not to say that it's still not lucrative to buy and own this stock, but it's best if you are a part of the industry already. Therefore, you're probably privy to the most recent developments that might not be known to the masses yet, which is where your own professional background and personal knowledge about the industry conservative incredibly well to get ahead of the pack. If you're old enough to remember the nineties in the dot com bubble, the tech sector completely changed the way we communicate with each other. Nowadays, we cannot live without the Internet. The landlines are pretty much a thing of the past, thanks to services such as Skype, messaging to what's up has become the new norm and communication, especially with millennials. The Internet has completely disrupted and forever altered the way the world works. Therefore, it was a disruptive technology and a great investment. Everyone in the tech world knew it was coming along before it became a reality to the rest of us. Some of the interesting sectors these days are industries such as digital marketing, cloud computing, remote working solutions and, of course, my personal favorite cross pollination of medical and engineering fields. Another sector that's really hot right now is the self driving cars. This sector includes the computer vision engineering that's used to create a car. They're consents the world around it. So it's more than obvious that this next step in transportacion logistics and personal transport is going to change the face off everyday existence as we know it. Now, within my company, with sometimes do a bit of I t head hunting and recruitment and having worked with a few select autonomous driving clients. Naturally, it was inclined to invest within the sector for the long run. But my whole point with all of this, is that you need to find sectors that have some sort of potentially disruptive tech. They don't necessarily have to be Unical companies, but they certainly need to bring something unusual and new to the market. But I must emphasize that investing certainly isn't for everyone. The best investors usually have a prior expertise within the sector that they're investing in, allowing them to better understand the impact off the research or technology. For example, a software developer could have seen the potential impact of Google and Amazon well before the enormous success off these two tech giants. I mean, I still remember the time when there were many other option for a search engine. Back in the nineties, however, only Google minister eclipse all other search engines and to even become a verb in everyday language. So back in the day, these were all well known companies, but still young enough, with the stock price low enough to be able to purchase a decent amount of shares for a relatively cost effective price my own interest and insights into autonomous driving technologies was primarily through head hunting perspective candidates to help my client companies with their recruitment process when we were building teams of their elite engineers, but also I'm a software developer myself. So I spoke to hundreds of potential candidates about their research, which has led me to understand more about how computer vision is beginning to have a huge impact in the medical field of neuroscience. Thanks to the advancements of computer vision, there was a huge opportunity for cross pollination between computer brains and helping people with complete impairments of the visual cortex, for example, people with blindness to be able to see for the first time ever. Now, if you come from a medical background, it's worth doing some research on these vast new applications off emerging technologies. Therefore, using your own professional background to find your investor niche will go a long way to endure a success in investing. Investing is definitely not easy money, and it's certainly not a get rich quick scheme. Investing means committing your money into business with an expectation of attaining a fair return over time. But because of the perpetuated misleading media ads that were once very, very aggressive investing tends to attract the attention of many regular folk, who think that trading and investing is a magical path to like a passive income. In doing very little, where you just kind of click a few buttons and hey, presto, you're rich. But nothing is further from the truth. Investing and trading are still some off the toughest skill to master right up there with becoming a surgeon or a professional athlete. If you approach this skill from a gambling, frivolous mentality without knowing anything about it, it can literally cost you your entire standard of life, your house, all your savings and even your family. Having said that, there are certain personality types and traits a person already possesses naturally, and these types of individuals generally tend to do very well in investing people who are analytical yet flexible in their approach. People who are emotionally resilient people who already have high level skill sets in disciplines that general require years of everyday practice to master, and people who have a never ending desire for self improvement, willing to go that extra mile to keep improving their own weaknesses by objectively analyzing previous actions and looking at what can be done to improve them. I'm not talking about self deprecating behaviors and being super mean to yourself, but instead having a cool head to be able to handle the pressure from a positively realistic point or view when the situation isn't quite going the way you wanted to. Now you will not be well suited for investing if you already have an addictive personality , if you have a history of addiction issues or even if you struggle with, you know, remedial math. And you're absolutely terrible with numbers because although you don't need to be a mathematician to be a good investor, far from it, ultimately you will be dealing with some numbers and calculations. But it's also not a good fit. If perhaps your memory is not that great. And if you've never been able to remember details of previous events, also, any sort of diagnosed attention deficit disorder or just um, problems focusing for long periods of time where your ability toe weight is compromised, investing and trading is definitely something you'll want to stay away from. In this case now in black, take, we get a number of people enquiring about a trade of funding process from those who don't even have a levels in the UK saying how they want to become investors and traders. I mean, we're talking about people who are at a very bad place financially, so please use common sense. And keep in mind that if you're completely broke, it is not the time to even start thinking about investing. Inevitably with investing, there's always lots of trial and error, which unfortunately goes hand in hand with extra expense, because the cost for mistakes in this line of work is always a financial drawdown. So if you're not a comfortable place in your life where you can take some heat moneywise than please stay away from investing until your situation changes through other ventures and you absolutely must be at a financially comfortable situation. Investing is not as difficult a straight ing, but it still takes a very analytical mind in a problem solving out of the box where thinking it absolutely shouldn't be attempted with your entire life savings. Any investment portfolio should never be more than 10% of your overall net worth, especially if you're first starting out, which means in more practical terms. If you have a house that's worth $500,000 you might also have a job that brings you 70,000 year. You may also have some savings or retirement plan minus any current liabilities such as death loans and mortgages. Let's say that your entire net worth comes up to about $450,000 so 10% of your overall net worth would be 45,000. And that is your entire available investment portfolio. Not 45,000 to start with, but 45,000 maximum. You wouldn't just chuck that in Tarsem. In a single investment, you would start small investing 1 to 2000 and then see how you do there. Then you need to prove your own confidence to the next investment. That again, you should only ever increase if you've made profit or had enough dividend payments from the previous investment to justify an increase. So prove yourself to bigger investments. Once you decide that it's time to invest again, you must review your own performance, see whether you could have done something better. Was there something that you have missed? Is that a factor that maybe could have been avoided. For example, how long did it take for the investment to go into profit? How many dividends did you have to receive to cover your original risk on the investment? Did the stock price change at all? Well, maybe you got stung by a fall in the stock because you failed to remember the eggs dividend . Eight ex dividend date is the day when, typically the stock false. So if you buy rights before that day, yeah, you will get your dividend payments since you own the stock. But the stock price will fall, making your entire position go into drawdown. So that is an example of something that you will need to eliminate going forward. 3. Lesson 2: this lesson will be about price to earnings ratio and also some reasons why this ped number can be a terrible way to try and find a good undervalue. Share price price to earnings ratio If you don't know what it is, it's calculated by taking the current stock price and then dividing it by the earnings per share a k a the E. P s number. And then if you don't know what the EBS number is, you can calculate this yourself by taking the Nets income of the company for that quarter substrate acting the dividends announced and then dividing by the number of shares outstanding. Most analysts prefer to use this kind of weighted average by using the last period of data because the number of outstanding shares typical changes over time in practice. This is how E. P s works. Let's say you have a company with a current share price of $35. They announced a net profit for the third quarter at $1 million. They also announced dividends to be paid out. Let's say it about $250,000 with the 125,000 shares outstanding taking all of this into account would leave you with the E. P s number of $6. With these numbers, you can now calculate the P E ratio, which is the current stock press divided by $6 E p s, which gives a P ratio $5.8. But what does all of this really mean? It means that investors are actually paying $5.8 per each $1 of earnings. This is a low P number, which can indicated the company has a good growth potential. Average PT numbers, typically very from industry to industry. But for example, if you take companies listed on the S and P 500 index, which you know represents the biggest 500 companies in the U. S. Typically you will find a P T number of about 15 to 25 p e ratio, although for some ultra successful companies, PT numbers can actually go into hundreds. And this convene that the stock price of the company question might be overvalued. However, when it comes to such large, very successful company, there are many other factors to consider. For example, let's take a company such as Apple clearly it has a brand name and a loyal following. So if you're considering purchasing Apple shares, the best time to do so would be after a market correction. So this might still be a very good deal, especially if you're aiming for dividend payouts and you're not necessarily looking for huge rise and stock price. But if we're talking traditionally, any research involving P E numbers advises that when the stock has a low P E number, this should indicate a discrepancy in the company's actual value and its stock price. Thereby offering is sort of an arbitrage opportunity to buy the stock with the view that this discrepancy will push the stock price to its true intended value given enough time. But if you're on Lee ever gonna use P E numbers for your investment decisions without knowing anything about the company that you're investing in your in for a huge surprise, because your investment may actually go into a draw down and never recover and why it's because, unfortunately, due to the fact that the low P E ratio most of the time is a great indicator, full lack of growth potential, a slightly better option would be to use p e g price earnings to growth ratio, and that takes into account the growth of the company for the period off interests. You get the p e G by taking the P E ratio and then dividing it by the annual growth rate of its earnings expressed in percentage growth. Now this number will obviously be heavily influenced by the types of data that you put in. If there has been a recent development in the company than using something like a historical growth rate, it's not gonna mean much because the parameters refuse your growth have been altered. If this is the case, then you could use a last quarter E. P s or what analysts usually do is to use an average number off historical and projected growth. There's a very generalized guideline. A PG ratio below one is a pretty decent indicator that the stock price is very likely undervalued. Another thing to take note off is to know which companies are about to have their i p l initial public offering. I've had success purchasing shares of companies about a month after their AIPO, so it's always a good thing to do some more research and keep a pulse on upcoming appears of interest and then use the technical analysis to get in at the right time. Now some companies have an excellent IBL waas. Some other companies have an absolute car crash of an appeal. For example, Facebook took almost six months to get out of their I P O disaster, and then some others just soared to high heavens on the first day and pretty much never looked back. But almost without a fail, what eventually follows is a market correction, and this happens because the investors that got in right after the i p o they will eventually book their profits, and that causes the price reversal. And that is exactly the time when you could have an opportunity to jump in a favorable price if you know what to look out for. 4. Lesson 3: This next lesson is about exploring the reasons for the under valuation. Now, this may be fairly obvious, but sometimes common sense takes a bit of a back seat and investing. So let's say your father stock that you believe is undervalued price wise. Now the first step is actually to understand why a stock might become undervalued. Is it undervalued because of some major issues, Maybe a quarterly earnings flop? Or you could have a piece of bad news. They can radically affect the future of the company in question. You could also have some kind of a systemic risk to. The entire sector may be a possibility of another recession, But then, on the other side of the spectrum, there are some less severe reasons, like seasonal fluctuations. Now some stocks are particularly vulnerable to seasonality like, for example, self commodities. So when you're investing, you really need to take note off something like that. Then it might be a short to mission. Such is a scandal that came into focus but overall doesn't really affect the future of the company. Think along the lines off Elon Musk smoking weed on a radio show. Or perhaps it's simply a part of a normal market cycle. Now these are off particular interest to us. I referred to the basic market cycles as the rule off fours. There are four basic cycles or faces off any market movement. These four phases exists regardless of the sector. Arise the class that you're looking at, and regardless, or whether the price is in any kind of a trend. And it's entirely relevant whether it's an uptrend or downtrend. So what you'll be learning here is to combine these market faces with some basic candlestick patterns. This will enable you to get a pretty accurate picture that will help you to time your investments much better, and I'm sure that at some point you have heard of these before. But I'm constantly amazed at how under used this particular technique is. Phase one is accumulation. Accumulation has a sideways movement. It's when the price keeps printing new candles. But it's not really advancing in any particular direction, staying in a relatively small range that we have face to markup. This is when the stock prices rising markup always means that the market is in an upswing, not necessarily an up threatened but simply in an upswing. Face three is called distribution. This face also has a sideways movement, and you can think of it as the peak off any upswing. The difference between phase one and Phase three is that face three. The distribution phase happens after the markup after the upswing, and this phase is almost always followed by Phase four liquidation. Liquidation is a downswing, but usually when stocks are concerned, it's simply a correction off the price, particularly because stocks almost always have that upward bias. Because of the nature of what they are after liquidation, you go back to phase one for another potential accumulation. You can extrapolate that if you learn to recognize face one. This could give you an excellent indication that the market is likely finished the correction, thereby giving you a signal that it's a decent time to invest on the actual charts. These basic formations take a bit of getting used to. There is also a couple of ways to recognize phase one. Now face three is not really dad relevant for investing unless you want to attempt to outperform the market by, you know, may be taken advantage of eggs, dividend dates. Onda typically, what happens on the eggs Dave is that the stock will fall by the amount of the dividend announced. Some investors like to take advantage of that by using an option trade, and I'll take it through that in the final section of this course going forward. I will also teach you how to recognize these four phases of market movement on the actual charts. But for now, I'm just going to show you a few examples pointing out the phase one. And don't worry if it all goes a little over your head. If you've never really dealt with Candlestick jobs before, I'm going to be explaining everything step by step. Pretty soon. Now here's a weekly chart of Facebook About a year after their I P up. Facebook is your typical successful company stock with some price corrections proceeding these accumulation faces that have marked with numbers 12 and three. But overall, this stock is in an uptrend most of the time. As you can see, the market paused with sideways movement after each correction before moving back up. And when you first start investing, you don't really know how it feels to be in a position. You may think that it doesn't really matter when you buy, because over time the price will go up. Anyways. However, let me show you what's been happening since June 2018 here ago. So there's a massive correction and progress. So if you took that view of hey, it doesn't matter whether by because Facebook is a unique and company, it always goes up. Now how would you feel seeing your investment going to this huge drawdown? Now, the truth is that some off these large companies are indeed over values. Just because a stock price of Facebook has fallen, it doesn't mean that it's automatically a good opportunity to buy, because at the moment it's still just a falling knife. That's why you need some kind of a systematic wait to show you a logical reason why you should buy into this. So, logically speaking, if something keeps falling and falling and falling and then it stops and starts bouncing around the same price range, and you don't really need to necessarily know the reason why does this happen? Just by the fact that the price has stopped falling and has spent a number of days number of weeks in the same price range indicates that whatever caused the initial liquidation is now over. Therefore, by looking for accumulation for Phase one, you can kind of think of it as a stopping signal, the price hitting the ground so you would enter investment on the basis of expecting the next markup cycle to happen. Main reason why you should learn how to time investments correctly is because you don't want to state or an investment that is in negative equity psychologically and emotionally. This is a very difficult thing to do. But by looking for a communication to happen before you go into your investment, you will minimize the possibility of a huge draw down. And the likelihood is that you will only be waiting for maybe a couple of weeks before the investment goes into actual profit. And then you're not Onley receiving the dividend payouts. If the company pays dividends, of course, but you also building a long term wealth by booking profits much further down the line because of price appreciation 5. SECTION II Intro: whilst you can be an excellent investor just by being really good, a fundamental research when it comes to finding undervalued stocks, it's quite important to have that technical analysis aspect as well, especially because there's loss and lots of occasions where the stock price is simply mispriced for no good reason. And the only way to see if this is what's really going on is through technical analysis in the next section off a breakdown, step by step, what you need to look for when it comes to market phases. Now this will also involve some Japanese candlesticks. But it's not gonna be like a 1,000,000 Candlestick patterns is that you will only be looking for about three patterns. 6. Lesson 4: this section will be about the technical analysis and how to read the charts systematically . But before I start wallpapering you with charts and candlesticks, I'd like to talk about some timelines and some goals that you should have as a general rule for good investing practices. Investments as an alternative way of growing your wealth long term really came into focus after that horrible credit crunch it off 2008 and up until then it was perfectly acceptable to just have a savings account that would typically grow around 5% a year. And I'm sure that most of your old where that the savings account interest rate is directly influenced by the interest rate of the country that you're living in. So when the interest rates get really, really low, like there are nowadays in the vast majority of the Western countries, relying on savings for any reasonable growth is no no longer much of an option, really. But back in the day before the credit crunch, let's say you had about $50,000 worth of savings when you apply compounding interest and compare the rate of savings offered in 2007 which was still around 5 to 6% versus 2018 which is around 1%. If you're lucky, you can see that back then you'd be almost doubling your money in about 4 to 5 years time without having to do anything. But instead the world has changed, and now you could only look forward to a measly 10%. Clearly, that's no longer serious option for anyone looking to grow their wealth, at least not until the interest rates rise back up to a historical meat. So people started to look into alternative ways of investing. Now, more than ever, people who are not from the financial world are looking to actively invest their money. So in a way, if you can outperform the current interest rate by investing in stocks, even a very modest 7% return on investment per year would still be a viable long term income. As an investor, your profits can, of course, come from various sources. 1st 1 and the safest one is receiving dividend payments by slowly investing in mawr and more companies. Over time, any investor should have a very nice income within several years. More shares means more income. You can also profit from the stock price appreciating overtime. However, this does mean becoming an active investor, which requires a lot more skill because in order to book your profits after the stock price rises, you need to close your investment instead of having just a buy and hold strategy for the sake of dividend payments. In this case, you also need to learn how to systematically recognize when is the right time to sell, and we want to something else. If you do decide to become an active investor, your profits can also come from selling a K writing call options and receiving premiums. I learned to combine this with a strategy known as the Devil and Capture, which doesn't really need much fundamental technical analysis to make it work. Dividend capture traditionally implies keeping the stock long enough to receive a dividend payout, but then getting rid of it on or after ex dividend date, which is usually the date when the stock price makes a correction. By the amount of the dividend, it falls and there in lies, the problem if you just bought the stock this fall in the stock price frequently erases any profits from the dividend So instead of chasing a short term strategy and jumping in and out, I actually have a better way of increasing your investing income. But using something by the name of covered call options again, Don't worry. If all of this is going over your head a bit, I will explain everything in detail in later lectures. After this little overview off how you can create an investment strategy and increase your income, we really need to get onto the technical analysis part. 7. Lesson 5: in this lesson, I'll be showing you how to start with technical analysis. The real skill that differentiates an excellent investor from mediocre investor is that the most skilled investors will try to match their fundamental analysis with a technical analysis. And this is done by looking at the Candlestick chart to further pinpoint the exact timing for buying the stock. Now, I already mentioned Rule of Forests. It is a very powerful but basic market structure reading technique that enables you to determine the most likely direction by identifying Phase one accumulation. Of course, if you're looking to buy the stock this time, let's go a little bit further to learn how to read Japanese candlesticks. For the more I will show you how to find something called an established swing through a proprietary concept. Off cue points Q Points stands for quarter points, and then I will teach you how to combine that with very specific Japanese chemist IQ patterns and those basic market structures. By learning how to do this, you will have a solid, systematic framework so that you know what it looks like when the stock is technically undervalued and mispriced on the actual judge This could be especially useful at times off regular market corrections, so it doesn't have to be some kind of a geopolitical massive risk. Now, if you can already read Japanese candlesticks, you may want to skip ahead to the actual cue points lecture. But I will also show you the difference between a strong versus weak pattern and in my experience, most people a little bit shady on delineating between these two. So I would recommend that you sit through this refresher because I will be showing you some final price action points that actually come from some of our blah tick research and development algorithms. But first things first. Japanese candlesticks that will shed some light on price action patterns. What are they? Canister charts were created in the 18th century by a Japanese trader as a way to analyze the price of rice. They're made up of a body of the candle, which can be white or black, or even green and red, depending on whether the prices rising or falling. Now you know that the cattle has a body, but it also has a shadow, also known as the week wicks. Show you how high or how low the price went during the candle period. One candle represents one period, one time frame. This period can be anything it could be one day, one week, one month or if you're a short term trader, you can also look at one hour, 30 minutes, 15 minutes count. But as a general rule, the larger the candlestick timeframe, the more accurate the candlestick pattern will be. So how do you know where the price opened and worried closed? Let's take the white candle first. Why it's empty candles or green candles on some maps indicate that the price went up well is the body of the candle that tells you where the price opens and where the price closes. In the case off the white candle, the price opens at the low edge of the candle body and closes at the top edge of the candle Body for the black candles is the other way around. The top edge of the cattle body is where the openess, while the close of the candle period, is at the bottom edge. Whenever you're looking at the Candlestick charts in real time markets, these candles will be dynamic, which means if you're looking at the current period, and let's say that each of these candles represents one day you shouldn't try to figure out if the candle will be up or down until the day is over. So here I'm showing you a very small chart to illustrate how the candles move. So each candle here represents five minutes. But as an investor, you really shouldn't look at anything smaller than the weekly. In daily periods, however, the principle is still the same. Until the candle period is done, the candle body and weeks will be subject to change was the period is done. You can then determine of the day or week was up or down. 8. Lesson 6: there are different types of candlestick patterns. Some of these patterns are considered a strong indicator of a slowdown or even a reversal in the price movements. For example, after a market correction. And there's some other battles that you may find widely available on the Internet well, not so strong. Some of the candles will have a smaller body with a large wick. The week can be located on either side of the candle. Some other Castaic patterns might have large bodies and no discernible weeks. But one thing is for sure. Anytime you noticed large wicks, they almost always indicate aggressive buyers or aggressive sellers, depending on which side of the candle body they appear. Therefore, price action analysis can give us a pretty solid clue about what the institutional investors are thinking. Furthermore, we're going to be combining these into different candlestick patterns comprised off to three and even four candles. Well, you may think that there are infinite number of combinations. Pretty, there's only about three patterns that have a high enough probability to bring a reversal after a market correction, which means they're the only ones that are off interest to us. These are specific candlestick patterns that I use to read the intention of the market participants. However, any price action you'll be looking at in the future must also come from a particular chart location. More on that in the following lessons. Now we've all heard the term buy low and sell high. But how you actually do this in practice frequently remains unexplained by a lot of educators out there. Well, I'm gonna break this down for you, step by step by combining the aforementioned market phases with candlestick patterns and eventually with originating areas off previously established price swings. This is especially important in cases when a stock has been publicly trading for a long time, meaning it's been through a number of more cups and corrections establishing swings the represent areas off deep liquidity. These are the areas where large institutional investors previously held their positions, where they held their inventory 9. Lesson 7: the whole idea off. Buying low and selling high means you need to familiarize yourself with reversal. Can distinct patterns. I will start with a pattern that has a highest probability of working out and the one that represents the most confident move that you will be looking to see after you've done your sexual and company research. Of course, you will be using a week recharge time frame, meaning that one candle represents one full week. This pattern is called the engulfing pattern. Each can stick. Pattern has two versions. One version for a buy signal, also known as the bullish pattern. Bullish engulfing in this example. And there's a second version to exact opposite, which is a signal for a cell also known as the bearish engulfing. But for the purpose of investing. For now, let's just stick with bullish patterns. Only the engulfing pattern is comprised off. Two candlesticks in golf in patterns can look a little different each time. But all in golfing patterns have one thing in common. The second candle body completely engulfs the first cattle body, which is where the name comes from. Let's have a look at some examples. Here is a chart of test law from this year. Looking at the left of the chart, there was a down move that lasted for several months after the announcement that Tessa was to cut prices of their vehicles in China, and this was perceived as news that the company may be in trouble and the markets reacted accordingly. However, after the dust settled about six months later, the weekly chart showed this strong bullish engulfing weekly close. This signaled a potential end off the down move, bringing Tesla all the way back up to just under the all time highest. But even if you missed this weekly bush and golfing, you still could have gotten in if you knew where to look. So here's your second opportunity. In a second strong weekly bullish engulfing. Here are some more chart examples off bullish and golfing After a market correction, these have all been taken from weekly charts from various companies. As you can see, all of them look a little bit different, but they have that same second candle completely engulfing the first candle body. At this point, I want to give you some homework. In the resource is section, you will find a downloadable ZIP file with the chart exercises taken from various various stock charts. Each exercise has one empty chart and one corresponding solutions chart, where the bullish engulfing is already marked for you. Now your task is to locate every bullish engulfing that you can find on the charts and then to compare them with the solutions chart. There is an extra condition that must be present. Each bullish engulfing you find is only valid if it happened after the market correction, so your process will look something like this. Starting from the right hand side of the chart and scanning the left horizontally locates a market correction, a price downward swing first. Then, at the end of the move, look to see if there was a bullish and golfing. If none is present, keep looking to the left off the chart, scanning even further to the left Step one. You look for the next downswing. Step two. At the end of the swing, look for a bullish engulfing. If you find one market it keep going to the left off the chart repeating this process until you reach the end. After you think you've found all bullish and golf inks. Compare your chart to the solution shot to see how well we've done and whether you've missed any bullish and graphics. This exercise will help you to begin to train your eyes, to be able to see a very early trend change that will probably be missed by most people. The reason why a bullish and golfing works as an early indicator of a market correction ending is because of what it represents. If you remember the bodies of the candles, tell us whether the candle period and lower or higher in price. So if you look at the bullish engulfing what it tells you in a very simple way, is that the buyers? One. If you're wondering why we're using the weekly chart for investing and not the daily George , the weekly charges a pretty large time frame in order to move and hold the price in such a way that this move even becomes visible on a large time frame. This requires an enormous amount of volume, a k money to flood into the stock, and this doesn't really happen when you know your mates Dave and Harry down the road by like 100 years each. He could only happen when is due. Shore investors such as banks and hedge funds with some very deep pockets, plow in a significant amount of money into the market, which in turn eventually shows up on a large time frame as a bullish engulfing. One thing that I feel I need to emphasize at this point is that you must always wait for the candle period to finish before you can safely say that you really have a bullish engulfing weekly close. Because if you don't wait, the second candle is subject to change. And while it may look like a bullish engulfing at one point, you can actually end up with a large selling shadow that pushes the price all the way back down to close the week lower. So now, instead of a bullish engulfing, you're staring at a failed push. Therefore, always wait for the candle period to finish printing before I continue into the next pattern. Please go ahead and download those exercises from the resource is section and then once you've completed him, come back for the next election. 10. Lesson 8: as I mentioned before, there about three or let's say, maximum four patterns that I used to time my investments bullish and golfing. You should already know by now, which also has by far the highest probability off ending the market correction downswing. I would like to emphasize once again that the patterns I'm showing you are presented in the order of probability as you go through this section of the course. Therefore, the bullish engulfing being the strongest one was the very first pattern I wanted you to familiarize yourself with. In this lesson, you learn about the consolidating pattern or consolidation pattern. Consolidation pattern is comprised of several candles, and it also kind of has a connection to the bush and golfing because, as you will see over the next few minutes, if if this pattern doesn't end with the engulfing candle, it actually has a much less of a pro body over ending the market correction now. Don't stress if you're not quite getting what I'm saying. Yet it will all become clear through my upcoming examples. At this point, I would also like to say that every version of a pattern I talk about in this course can be either a week were a strong pattern. However, this is a rather long subject, but just quickly using a few examples here, you can see a pattern that represents a very strong engulfing because the top of the second candle went up and closed a lot higher than the first candle. This meant that the buyers one without any ambiguity. The bias created a very strong demand. They will be difficult to break even if the price goes back to test this whole area. In fact, a lot of the time, the most ideal price to enter after you see this type of bullish and golfing clothes would be to wait for the price to return to pull back to this first candle open price area. And then I have the second pattern, which is still a bullish and gulf. But this time it's a weaker signal because if you look at it closely, the second candle closed just slightly above the first candle open price. But it failed to create a brand new high there by staying in the same range is the first candle. Whenever you're dealing with price action, if you're looking for that strong buy signal. You really want that second candle to clear the whole area and to unequivocally reversed the direction. And finally, this third example, you can see that the second candle has a large selling shadow this large weak. So although the second cattle body has engulfed the first candle, and it also created a new high, this selling wikis so large that it's basically half of the entire length of the second candle. As such, this is a very weak by signal, meaning that towards the end of the candle period some pretty strong sellers came into the market, and the buyers that stepped in didn't have quite enough buying power to hold the price with confidence. But I'm not gonna go into every single variation of weak versus strong pattern, since you know we'll be here until the end of time. But instead, if you really wish to master the candlestick patterns and to learn how to recognize strong signals of versus the weak ones, please refer to my course on can mystic patterns trading. You can find the link to the course in the resource of section off this lesson, okay onto the consolidation pattern, consolidation is characterized by a sideways movement. The price consolidates stays in a range. It is a multi candle pattern. Comprise off a minimum four candles, but sometimes five or six. And these candles need to stay within a clearly defined range. Consolidation typically has very similar size candle bodies. In many cases, the candle bodies are completely uniform. A strong consolidation pattern should always finish with a confident, bullish candle, ideally a bullish engulfing, although sometimes you can also have a candle that looks a little bit like this. Basically, you have this consolidation here and this huge candle that opened the week at the top of the CAS oddity range and then just jumped away from the entire area, reversing the direction. Now let's use the same example to illustrate a week consolidation. Imagine you were watching the market of the time when this consultation was happening. All you would see is the consolidation itself. You don't know what's coming after that, right? But once you notice those four similar size candles, you can make an educated guess that you have a consolidation. But the week didn't end with a bullish engulfing. It is a bullish candle, but it's not engulfing. Therefore, the week version of the pattern won't have that bullish engulfing finisher. Instead, you're more likely to come across a pattern that's known as an inside bar inside bars, a to Kendall pattern. And it's called that because the second candle is closing inside the first candle body. Now you might still be able to use this kind of consultation to enter your investment. But keep in mind that a week consolidation is a lot less reliable when it comes to catching the end of the market downswing. And that's why you may want to wait it out for another week or two until you have that definitive candle. The skyrockets away from the ranging zone consolidating pattern can occur in all asset classes and all markets, and it always has similar reasons why it occurs. It's either a technical reason price simply running into a demand area, indicating price agreement amongst the institutional market participants. Or they might be waiting for release off some sort, such as interest rate decisions, quarterly earnings reports or even something like a non farm payroll number, which tells us how many jobs were added in a particular period and that gives a good indication of how the economy is doing as a whole. It is a leading indicator. Whatever it may be, you don't necessarily need to know the reason for the consultation. It always means that the price has stopped advancing in the same direction in case of investing in stocks and shares. The price might have been in a market correction, and now you're using both the downswing and the subsequent consolidation to obtain the most favorable price for your investment entry. No, I get many people asking me questions like, Hey, D, I just saw a lift to sold off Today should just jump in. Well, no, just because there's a one day or a one week selloff, it doesn't mean that it's automatically a great opportunity to buy. In fact, if you remember market cycles, the first selloff is very likely. The start of a liquidation face the start of the market correction, and you want to buy into that. The aim is not to be a contrarian. This is a common misconception. You know the contrarian and, you know, gonna try to be psychic either. In fact, you you actually wanna limit all guesswork that doesn't have any rationale behind it. Instead, you will be working with price data that you have right there in front of you to find a systematic clues when the market correction is likely finished. In case of buying stocks, the process you should be working with looks something like this. First you do your sector and company research, ideally finding one with a low P ratio. If it doesn't have a low P E ratio, ask yourself if this is already touted as a unicorn company or that it has a highly disruptive technology. If it doesn't, I would stay away and move on to something else. Once you find a suitable company next, you need to understand a reason for the under valuation. For these three reasons systemic risk, lack of any growth potential and some bad news. I would also move on to something less risky. However, the 4th 1 market correction would mean a potential opportunity, which is also conditioned you're looking for in either the successful unicorn or a brand new disruptive tech company. Once you have that, you absolutely must ensure that there is one off. These three reversal can't stick patterns presence on the weekly timeframe. If you see them, it's time to buy. If none of these are present, you stay away. At least until you see the reversal pattern on the weekly timeframe charge. I will put this flow diagram as a download in the resource of sections so that you can reference this process in the future. And just as a little case study those of us who remember the big crash of 2008 that wiped out 10 years worth of gains within six months here is what was in the weekly chart of the very bottom off the crash a bullish engulfing. Now this area here, prior to the very bottom was the beginning of the quantitative easing program. So that's more of a slow down in price which happened right after the Curie program was announced. And then you have the final bullish engulfing that started a massive bull run. So here we are, some, like, 10 years later, and the the S and P 500 index, it's never looked back. So if you knew about the bush and golfing patterns of the weekly charts, you could have called the bottom off the worst crash in global history. It's a pretty powerful skill to have. But remember, it's not just the candlesticks, Okay? There was also a fundamental reason, which was the enormous government intervention that was the real cause. But on the chart, this event presented itself is a strong, bullish engulfing who needs a crystal ball or a fortune teller when you've got the awesome power of price action right now, To wrap up the section, I would like to quickly refer back to the consolidating pattern, which is a pretty good indicator. That accumulation phase is taking place now. They definitely complement each other. But on a technical level, there are some minor differences between the two, and those differences are number one number of candles and over to shape off candles. True consolidation typically only ever has about 4 to 6 candles maximum, and it almost always has very uniformed candle bodies. But even if they're not completely uniformed, the bodies have a clearly defined range. Accumulation, on the other hand, can go on for a lot longer than six candles. It's also quite messy. It still moves within a range, but it doesn't print many similar candle bodies. This completes this section number two on Candlestick patterns. If you do wish to take your candlestick reading skills a step further, remember that I do have that Candlestick Workshop course that I mentioned just a while back . So check the resource is area for welding links. 11. Lesson 9: Welcome back. This section will be about handling market corrections and using them to our advantage. And for that, I'm gonna use my own concept called quartile points A k Q points. I came up with this concept when I was still a medium term swing trader, which means that I held my positions anywhere from about two weeks up to about two months. And for that to work, I needed a way to find the best technical area with a low risk and high reward systematically. Now I noticed that when the price would move from point A to point B and then back to a day , there was a golden area usually at the point of that large initial originating move that kicked off the entire swing where the price would start to consolidate or create a bullish in golf before starting another upswing. Eventually, I realized that this is a high probability event. At the time, I didn't quite get just how powerful this simple observation really waas. But over the years, my systematic cue points have become the most important technical tool to ensure that you're buying of the lowest available price when dealing with market corrections. So rather than just guessing where the market correction white end, you have a definitive area where you want to look for the developing price action that I spoke about in the previous section. Your bullish engulfing your inside bark consolidation and or accumulation. Knowing how to find these cue points will give you a systematic way to locate the best possible price available in cases where, you know, you may want to purchase the stock of a company that's been around for a while, such as the weekly Chart of Google. For example, you will start looking from right to left to find in the market correction. But then you will continue to scan further left horizontally, of course, to locate an originating move that started the recent upswing. So in this case, it will be this area here. The easiest way to do this is to look for obvious untraded lows. Now what do I mean by untraded? Well, if I mark this low as number one and this low as number two low number one has not been traded through yet, meaning that it's low price is still untouched. Virginal? Okay, where's low number two? You'll see that it's cutting through candles of low number one. Now, when you're looking for a valid low for our purposes, you want to avoid carting through candles. After you find the recent originating move, I want you to subtract the highest price from the lowest price and divided by four to get four equal sections. So on this chart, that's 12 89 minus 968 divided by four is about 80 bucks. So, no, for every 80 bucks you add, these quarter I lines onto the chart. But we're not gonna be interested in the middle courthouse. So I'm gonna go ahead and remove the middle line, leaving you with the bottom quartile, which we're gonna call que lo this entire zone in this top court out, which we're gonna call Queue high. So it's an entire zone. Okay, It's not just one price. I just want to make that clear for the purpose off investing in dividends. The only quartile that I'm gonna be interested in is the bottom quartile. Now some people might be thinking, but surely for every correction for every downswing, there ca NBI a potential area for Q points. Well, no, because there is another rule, one trigger condition for the Q points to even be valid. So let's imagine that this move here hasn't happened yet. So all you have is just like a simple upward move. However, once the market starts to go into a correction into that downswing, you won't really know that you're looking at a sustained market correction until that move has fallen below 50% off the last upswing. But that's not where you won't be buying, because this is the middle. Now, regardless of what you've heard before, no institutional investor buys in the middle of the previous upswing, okay? And why? Because this limits their profit potential and it increases the risk. The middle's off swings are retail prices. You don't want to buy and retail prices. You want to get into your investments at wholesale prices. And where are the wholesale prices? They're at the golden bottom quartile area que lo. But this 50% correction I'm talking about is just like a trigger point for the creation of your golden area, que lo in the queue high. But as an investor obviously looking to just get into the position, you're only interested in the queue low 12. SECTION 3 Intro: in this final section, I will delve deeper into the waters of active investing. Now this is for those of you want to take their investment skills a little bit further and start generating more income through some slightly more advanced techniques. Rather than just kind of sticking to dividend payouts, We'll be exploring simple, simple ways to exit an investment in cases where you want to book your profits to benefit from stock appreciating in price. I will also talk about generating further income through writing covered calls, which is another simple option strategy. And then to finish the course, I'll go over how you can use a dividend arbitrage around the ex dividend days to take advantage of a high probability event that frequently happens when the dividend amount is declared, which is what the eggs dividend days are. So let's get into it. 13. Lesson 10: like I mentioned in the intro old This section, we're gonna talk about active investing, so let's begin by looking at some systematic ways to exit your positions. But first thing is to ask yourself, Why would you want to exit a position at all? Well, there are many reasons, but some of the more usual ones are a significant change in economic conditions that may favour a different sector. Or it could be that your investment hasn't gone anywhere in over a year and you want to place your capital somewhere else. Or perhaps the stock prices appreciated quite a lot, which ones taking some of it off for pure profits When it comes to exit strategies, I always have a maximum duration in mind on the active investment. This is less relevant if you're only in it for the dividends, in which case you're simply a buy and hold investor. But since I come from a trader background even for my long term investments, I will always set a maximum duration, after which I will close the trade out now. Active investing is not that much different than active trading, except you're working with much longer time frames Everyone will have different ideas on how long they should stay in an investment. But for me, I keep them no more than about 2 to 3 years on this inner arm involved with the actual company on a higher level of responsibility. So that's your first option to keep your position until the maximum duration time is reached and then to close out your next option requires a little more skill. It involves a price actual pattern. Now remember how we can use a bullish engulf important to enter a position? Well, there is an exact opposite pattern that tells us that the sellers for bears have taken control of the price. And that's why it's called a bearish engulfing and looks like this literally the exact opposite of the bullish engulfing. Now the way you would use a bearish engulfing would be on a monthly chart. Up until now, you've been looking at the weekly chart for your entries, but when it comes to your exits, you really want to ensure that you're not jumping the gun on the exit ahead of time. So that's why you want to go up to a higher time frame and then wait for the monthly candle to finish. This means you really only need to check your investment once a month. If you see the bearish engulfing pattern on the mother chart fully printed, this is your exit signals. One thing to note is that the bearish engulfing we're interested in must happen after an upswing. Like you can see in this example, if the market is in a corrective phase already, you know it's already falling. Seeing a bearish engulfing is really not that relevant because the market is already declining. You're not really learning anything new. Therefore, bearish engulfing has the most significance when it happens after an extended upside run. So here's an example of the bearish engulfing after an upswing that brought about like a 21 a month market correction. We're looking at a chart of company called Palo Alto Networks. Here there is another one. This is T mobile bearing golf. After an upswing with a 12 month market correction, Here's a test, a chart bearing golf after an upswing. Now, the time off this video, Tessa was in its 23rd month of the corrective move. I didn't really have to look too far for any of these. Almost any chart that I pulled out has the same thing going on. If you know how to spot these bearish in golf things on the monthly charts, they have about 70% probability of bringing an extended market correction phase. This is something that we tested algorithmic Lee, thanks to our engineering team from blah tick. Now, finally, the third reason why you'd want to exit your investment might be a change in the overall economic conditions. Usually this test to have a lot to do with interest rates. Governments manipulate their interest rates to influence money supply as well as to achieve certain goals of price stability and to also ensure sustainable economic growth. No difference. Docks perform differently in various interest rate conditions. This is a rather generalised guide, so it usually goes something like this when the interest rates are higher. The financial sector does very well, so retail banks, investment banks, insurance companies, brokerages These types of companies have large cash holdings due to their business activities, and the interest rate hikes directly increase yield on this cash, which goes straight to earnings now in low interest rates. The sector that typically does the best are your everyday consumer goods, but also the luxury items sector. See, low interest rates are used to stimulate consumer spending, so that way you have more disposable income. So naturally you would be looking to buy more luxury items as well. When you're investing, it's good to have an idea off this very generalized market condition explanation in regards to different sector behavior. So, for example, if there's a change in interest rates, you might realize that some of your investments might be better off in another sector. Therefore, this would also be a very valid reasons to just close out the existing investment and look for another opportunity elsewhere. You don't even need a bearish engulfing for that. And just like I said that you need to use fundamental information before you start looking for engulfing patents to end to your investments. Likewise, you can combine the interest rate changes with the bearish engulfing price patterns to make like a systematic exit rule 14. Lesson 11: one way of increasing your investment potential is through a simple option strategy using covered calls. So what is that? It comes from a fairly common risk management strategy, which involves holding a by position in the underlying stock and then selling a call option . Now, when you decide to open a short call, you become a writer off a call option and think of it as offering insurance from downside risk to another market participant who might be interested in purchasing a stock at a predetermined price and you for selling the service. Just like an insurance company, you will receive a premium payment. The difference between an uncovered call and a covered call is that with a covered call, you already own the underlying stock. So in the right circumstances, you can deliver the product without having to go out and purchase it yourself in the open market. And when you are writing a covered call option, a K opening a short call, you are actually expecting the price to go down, or at least to stay in a range. Now, If the price keeps going up and you don't own any underlying stocks, well, then you might be in trouble. And this is why selling uncovered calls is a terrible idea. The potential for your loss without owning the stock is literally unlimited. But if you do on the stock and the market is in a corrective phase, or even in a range, that the covered cause that you're selling will be out of money. Which means as far as the buyers are concerned, they're worthless to them, in which case the option will never get exercised. And you get to keep the premium that you received. Here's what that will look like. In a more practical example, Let's say you decide to sell. Ah, hundreds share Call option 100 years is ah is one contract. So in order to having covered call in the first place, you need to already own 100 shares off the company's stock. Let's also say that the current stock price off this company is $50. So you do your analysis and you conclude that any upside move is likely to be limited. Let's say you found some technical supplies and there somewhere around $65 so you go ahead and you sell one call contract with a strike price off $65. There will expire in six months. And let's also say that the premium on this call option potentially pays about $3 per share . How much profitable loss you will make will depend on what happens with the stock price. If the stock stays around the same price, the buyer will not exercise the option, and you get to keep your premium. Now, if the stock rises above the strike price, the buyer will likely exercise the option. And this is where the trouble starts. If you're doing an uncovered call if you own the shares already, the loss on the option will be offset by your existing long position in the underlying scenario. Three. The stock declines in price, in which case you will also receive your premium because the option will expire without being exercised. But one thing to note is that the premiums are only paid out once the option is settled and not like when you first open the position. Now this isn't an options trading course, so I'm not going to go into various details and options trading strategies. But, you know, this is just some ideas that you may want to use in case to do wish to maximize your investment potential sometime in the future. It is not a necessary step if you simply wish to stick to buying an undervalued company with some good growth potential and then only plan to receive dividend payouts is income. 15. Lesson 12: In this final lesson, I will talk about another way to maximize your investments, which also involves using another simple option strategy called the ex dividend capture. Xidan Capture relies on a very high probability price action event that usually happens on the day that dividends are announced. The ex dividend date. On that day, in the vast majority of cases, the price of the stock will fall by the amount of dividends announced. This is a high probability event that we can capitalize on. But in order for this strategy to work, just like in the previous lecture, you have to own the stock outright, and you need to have owned the stock for a while. But it definitely is on the stock case. I have mentioned this before. Now, if you have a little search on the Web for eggs dividend capture, you will find criticism that, oh, it doesn't work. But upon closer examination, the problem is that the people who are advising on this strategy or just given our bad advice, one of which is that or you only need to buy the stock about a week or two before the ex dividend date, But they're actually totally missed the point. Even if you buy a head off the eggs, Dave Price may still stay around the same levels. It doesn't mean that is gonna appreciate. So when the market is waiting for new data, this usually not that much movement anyways. But let's say that you've already purchased the stock some time ago. I mean, it could be several months ago. It could be a couple of years ago. If you're even half decent and reading the market corrections, then by the time you attempt this strategy, the price should have moved away from your entry quite significantly, in which case you will be receiving your dividend anyways. Therefore, this is not a strategy to try on a new investment, but rather on one that you've been holding for a number of months or even a number of years . In a nutshell. What this strategy aims to do is to both receive your regular dividend payout and to also profit from the fall in prices on the ex dividend days. One thing to note is that if it and master buys the stock on ex dividend date or right after, then they will not receive the dividend for that period, which is why I have to own the stock before the eggs did date. Some people out there have tried to have their cake and eat it, attempting to buy the stock about two or three days before the X Dave date, and then to try and capture the dividend payout as well. There's the fall in price, but when the dividends are announced, the price falls and takes the underlying position into a minus. So although you will receive a dividend payouts, it's probably not going to be large enough to fully cover the loss that you know having your underlying, especially since the price may keep falling on subsequent days as well, taking the drawdown even deeper. Plus, you don't get your dividends right away. So for a while, all you have is just the negative position, which is emotionally very uncomfortable, especially for new investors. No, let's say in another scenario, we have an experienced investor who knows and expects a drop in prices here. She already owns the stock and has already received multiple dividend payouts, but now wishes to maximize the investment. They can do this by opening a long put oxen straight to take advantage and generate extra profit from the expected price drop. Buying a put option means you're expecting a drop in prices. But unlike the previous lesson where you received a fee for selling an option in case of buying an option, you are the one who has to pay for the premium. So opening a long put option and paying a premium for it as a limited risk. So the premium that you pay is your maximum possible loss on the position. A good way to position yourself would be to ensure the last dividend payers amount isn't bigger than the premium. So that's a bit of simple risk management for you. Now let's have a look at how this would work. In a practical example, going back to Armagh Nocera Zinc company. With the current stock price of $50 a lot of institutional investors and professional traders know about this price drop or next of date. So bear in mind the closer that the exit date, the more expensive the premium becomes. So ideally, you don't want to be opening a long put option one day before, because the premium will be the most expensive. Ideally, you want to open that long. Put about 5 to 7 working days ahead of the exit date. And this is why you may want to set the strike price just a touch higher than the actual price of stock to, ah, give it some wiggle room. Let's say you enter a long put with a strike price at $53 you might say, Why? Why 53? Why not 55 or 50? Well, I tried to stay away from round numbers because psychologically, a lot of people will be thinking along the same lines of those nice, easy round numbers. But as an investor, you have to be a little bit more savin that. So I expect these psychological prices to be reached and tested, but ultimately to not be sustained. And this is why a strike price off weird numbers such as 53 or 57 maybe was 61. It would be a much stronger position to be in. Okay, so you have a strike price at $53 above the current price of the stock. Now, when you're dealing with options, you can have American style options and you can have European style options. The difference between the two is that you can exercise American style options at any time before their intended expiry. You're being options can only be exercised on the date of expiry. So now why is this important? Because there's a thing called time decay and without going too deep into that time to K eats into profits off long options each day that nears expiry date. I didn't mention this in the previous lesson because time decay works in your favor when you're the seller of the option. But if you're a buyer, it works against you eroding your profits the more days the option stays open, and that's why I prefer to use American style options. But because of this flexibility in being able to exercise the option and any time American style options premiums are more expensive. But really, if you're a buyer used to never let the long option go to expiry date if you can. So once you're option isn't profit. I would aim to exercise it as soon as possible. Already may be on the same day or one day after the ex dividend date. Now let's summarize all that we've learned In the beginning, I spoke about how to find your sectors of interest. Despite many stock investing courses advocating diversification, there is such a thing is over diversifying and going into sectors you know very little about which will ultimately limit your portfolio performance. So I suggested that you stick to about two or three sectors, preferably something related to your professional background. I then talked about how to use fundamental data to determine whether the company has potential for growth or not. Then I moved on to some technical chart analysis, and I showed you what the market structures looked like and how to use the market corrections to your advantage by combining them with developing price action patterns. And we did that by using my own concepts of Q points a cake. Wartelle points to find the correct timing to enter your investments, and then I introduced a couple of ways to boost investment potential. But using some simple options strategies, I hope you found this course useful on your quest to start with value and dividend investing the right way. If you decide that you want to step into the world of active trading. I would like to recommend my course on mastering supply and demand. You will find all the relevant links in the resource is section off this lesson. Good luck. And thank you for watching.