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Brief Overview of the Markets and Investing

Investment Trading Markets are divided into 4 groups in North America.



OTC (over the counter)


Stocks will either be sold in the Primary Market (IPO),  or in the Secondary Market after the IPO has launched.

There are generally two major participants in the trading markets:

Main Street

Are people like you and I who buy and sell Equity, Fixed Income, Mutual Funds, and Derivatives, 

Institutional Traders

Are Traders that execute buy and sell order for large organizations commercial banks, governments, corporations, government-sponsored enterprises, money market mutual funds, futures market exchanges, brokers and dealers, and the Federal Reserve

Market participants are those buyers and sellers transacting business in the principal market for an asset or liability. These participants are not related parties, have a reasonable understanding of the asset or liability, are capable of entering into a transaction to buy or sell the item, and are motivated to do so.

This page will be focusing on Main Street Investors in the Secondary Market.

Main Street Traders are divided into two main groups. Speculative and Hedgers

Speculative Traders: Trade on a hunch typically by using technical analysis. Speculators trade based on their educated guesses on where they believe the market is headed. 


Speculators are often compared to gamblers at a casino.

Hedgers try to reduce the risks associated with uncertainty, while speculators bet against the movements of the market to try to profit from fluctuations in the price of securities.

Hedging against investment risk means strategically using financial instruments or market strategies to offset the risk of any adverse price movements. Put another way, investors hedge one investment by making a trade in another.

Hedgers typically own a portfolio of stock and they protect their investment portfolios (usually) by taking out insurance on their positions in the event of a market down turn, and its usually done by buying or selling derivative products or taking short positions. Some portfolio managers will simply use diversification over multiple sectors to hedge the portfolio.

Speculative Traders can have short, medium, or long time horizons, and can be Bullish or Bearish

Speculative traders are typically Day Traders or Swing Traders, they're looking for small movements in short amount of time. Due to the amount of trades that this type of trader makes, platform fees such as trade commissions, exchange exchange rates and minimum balance fees are very important factors when it comes to P/L.

Speculators typically manage their own portfolios and those portfolios typically have a market value of less than $250k.

Hedgers typically have medium to long term time horizons and are usually Bullish in the market on their principal holdings. Hedgers look for steady growth over longer time horizons and will maximize their profit potential with Dividend income, Selling Covered Calls, and Benefiting from positive Earnings and related Economics reports.

Hedgers are usually a "Buy-and-Hold" trader, and would usually have a larger value portfolio.

Hedgers usually hire an account manager, like an Investment Advisor who is with an SEC or IIROC approved firm, and would usually have a portfolio with a market value in excess of $500k.

Hedgers typically have a diversified and well balanced portfolio consisting of Equity, Fixed Income, and Cash, spread over a minimum of 7 Sectors. ie:

  • Financials

  • IT

  • Energy

  • Utilities

  • Materials

  • Industrials

  • Real Estate

  • Health Care

  • Consumer Staples

  • Consumer Discretionary

  • Communications Services

Financial Instruments:

Most financial instruments fall into one or more of the following five categories:

  • Money Market Instruments, (short term debt, [GIC] less than a year)

  • Debt Securities, (long term debt, [Bond] more than a year)

  • Equity Securities, (exchange traded stock - Exchange Traded Funds - Mutual Funds)

  • Derivative Instruments, (Options and Futures Contracts)

  • Foreign Exchange Instruments.

These are just some of the ways that you can participate in the market and grow your portfolio and increase your wealth. However, the basic overview above is a grossly oversimplification of the market and its respective instruments. 


You have to be aware of your risk(s). For example; your risk exposure in a Long Position on a $50 stock is simply $50. However, your risk exposure in a Short Position is theoretically unlimited.

Risk factors that you have to be aware of:

  • Market Risk

  • Foreign Exchange Risk

  • Political Risks

Risk is by far your most important element to manage in investing. There is a whole designation directed toward risk management as a career path, it is the FRM (financial risk management) designation. It is the second most prestigious designation in the industry, being second to the CFA (chartered financial analyst).

Just as you manage your manners in public, put a lock on your front door, consult with your doctor about health issues, avoid areas and people who do not have similar appreciation for life; a long living and healthy successful person, to some degree, manages everything from a risk averse perspective. 


I could not stress enough about the importance of managing risk and being aware of your own risk tolerances. This is the difference between one person cautiously entering an unknown area, to another bursting in with guns blazing without any intel. You can get lucky sometimes but not every time, ...and if when you loose, you loose big, that can hurt.

The nature of risk management is to gather intel and analysis, and doing your best to put the odds in your favor before you participate in the market.



An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.

An investment always concerns the outlay of some capital today—time, effort, money, or an asset—in hopes of a greater payoff in the future than what was originally put in.

For example, an investor may purchase a monetary asset now with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.

  • An investment involves putting capital to use today in order to increase its value over time.

  • An investment requires putting capital to work, in the form of time, money, effort, etc., in hopes of a greater payoff in the future than what was originally put in.

  • An investment can refer to any medium or mechanism used for generating future income, including bonds, stocks, real estate property, or a business, among other examples.



More than 6000 companies trade on the NYSE and NASDAQ alone. Not all of these companies are investment worthy. Penny stocks for example, usually trade on the OTC for fractions of a penny, but they also have wide spreads and low liquidity.

The bid–ask spread is the difference between the prices quoted for an immediate sale and an immediate purchase for stocks, futures contracts, options, or currency pairs. The Bid is the price a buyer is willing to purchase the stock, The Ask is the price that a seller is willing to sell the stock. So if you are buying, you are buying at the Ask, if you are selling, then you are selling at the bid. (Unless you are placing a limit order. In that case you are setting a price that may be outside of the current Bid/Ask)



is the amount of an asset or security that changes hands over some period of time, often over the course of a day. For instance, stock trading volume would refer to the number of shares of a security traded between its daily open and close.

High float:

A stock float is considered high if it has a large number of shares available for trading. ... A float may increase when a company issues new shares as a way to raise capital. It can also decrease if insiders or major shareholders buy up shares or increase if they sell shares.


A stock's liquidity generally refers to how rapidly shares of a stock can be bought or sold without substantially impacting the stock price. Stocks with low liquidity may be difficult to sell and may cause you to take a bigger loss if you cannot sell the shares when you want to.



First and foremost, I always advise people to only trade market instruments that they are familiar and comfortable with. Do not involve yourself with something that you do not understand, especially with the Derivatives and Futures market. Although lucrative, without proper management of those type of investments, you may find your self taking delivery of 40,000 lbs of pork bellies on your front lawn. So stick to what you know.

I suggest to stay away from penny stocks that are sold OTC or on the Pink Sheets. These stocks usually have a large spread and very low liquidity.

Stay away from stock tips from friends and strangers. Everybody is looking for a homerun on their investments. Where they invest $5k and over night its worth $1mil. This does happen, I have seen it, but the people who profit are few and far between and most of the time its a result of an illegal pump-n-dump. The OTC has barely any oversight and regulation. Its best to just steer clear of that market and anyone who suggest stock from there.

You should let the market do the work for you. For example, the S&P500 and The Dow Jones Industrial.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.

The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a price-weighted measurement stock market index of 30 prominent companies listed on stock exchanges in the United States.

This narrows down the top 500 companies traded on the exchanges in the US, the Dow filters it down even more. Stick with these companies whether you are a day trader or a buy and hold hedger. The down side is, these stocks cost more. The upside is that these companies are going to be around for many years to come.

The volume is high, the spreads are low, there is plenty available liquidity to quickly enter into and flatten a position at anytime during market hours.



To learn more about OPTIONS TRADING



To learn more about Technical Analysis and Research




Market Points to Add (I will elaborate on the following soon)

  • Chart Patterns

  • Order Types

  • Entering and exiting a trade

  • Block Trades

  • Board Lots

  • Odd Lots

  • leveraging Credit and Interest

  • Generating Cash Flow

  • Retirement and Estate Planning

  • Insurance

  • Registered accounts (RRSP, TFSA, RESP)

  • References, Books Websites - Investopedia / Seven Rules to Wall Street

  • KYC - Know Your Client

  • IPS - Investment Policy Statement

Being a “Former Approved Person” under iiROC regulatory agency and employed by Scotia Capital. I am required to disclose that I am no longer a licensed broker. That in itself legally prevents me from providing any Investment Advice.


All conversation(s) should be deemed as casual correspondence and focused mainly on the mechanics of the industry, and not be interpreted as "advice", and/or the advisory of placing an interest in any one particular security.


You should always consult with a Currently Approved Person under the iiROC regulatory agency before taking a position in your investment portfolio based on any interpretation(s) of the conversation(s) that take place here or with any person, whether it be verbal, written or implied.


This message is to provide transparency and to prevent any misunderstanding.


I recommend visiting the iiROC website to publicly view the credentials and disciplinary actions (if any) about any person whom you are to work with in the Financial/Investment industry. 

Scroll to the bottom of the page,

Click on Advisor Report

Scroll to bottom of 2nd page,

Enter the name of Advisor, - click search.

This will provide you the background on your advisor and whether he/she are licensed to represent the type of investment that they are recommending.

Past performances do not dictate future results.



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