Hi, guys/gals. I am a retired economist snowbirding between Florida and Ottawa, with lots of data and some self taught programming experience, mostly spreadsheet macros before getting into Easylanguage and Ninja. Was working with Omega Supercharts in my 20s but gave up, focused more on real estate, returned to Tradestation couple years back now that I can work at this full time, and being inspired by a Florida neighbour who actually makes a living from trading, but migrated to Ninjatrader for the bulk backtesting in the basic package and price (free!).
To my knowledge, there is no way to do direct algo (equities) trading from within a Canadian RRSP (our version of an IRA), so the licensing fee is moot. NinjaT needs to partner with at least one Canadian equity brokerage that does RRSPs, and I think Virtual Broker is the obvious choice. Or better yet, open a Canadian branch of NinjaT Brokerage! I don't want to bust open my RSP money and open a futures account until this becomes more serious and I get the tax implications straight in my mind.
My current thinking is that if I ever start making money, trading in a regular account in Canada will be taxed as capital gains, whereas any profits I build up in my RSP will eventually come out at top marginal rate, so trading outside an RSP may make more sense. My understanding is that Canadian tax rules on day trading are very different than US, so IRS rules are not a guide. Comments?
Futures such as ES are not permitted in any RRSP, and IB (the only Ninja-capable equities broker in Canada) does not have RSP accounts. I also need a bit more trading experience to qualify for an IB account. I must confess, I don't like the IRS disclosure paperwork involved in opening a Canadian IB account, but its not a deal breaker. Love that IB founder, especially his 2012 political ads attacking socialism.
My current workaround is to trade Dow and SP500 3x ETFs, UPRO and SPXU seem to currently work best in backtesting, sometimes using the signals/movement from the ES or the ES as confirmation. I am getting pretty good at finding patterns that repeat and walk forward well for a few months, but get concerned when patterns will not walk forward in previous seasons or years. Becoming aware that one needs to treat each month of the year as a different market?
My current approach, the last couple of weeks, is to abandon trying to find a pattern that walks forward with a good profit factor going a full year back in history, and rather use my backtested system as an indicator, but pilot with hands on discretion, trading 10 shares. A good day I am up $2, and bad day I am down $2, real money after the $1 commission Virtual Brokers charges. On my small sample, I am up most of the time. I am surprised at the quality of my fills using odd lots.
I find I need the speed/action of 1 minute bars to hold my attention. I use CCI to early-signal overbought/oversold, inspired by a futures.io (formerly BMT) video on CCI support/resistance charting, and a slightly slower composite indicator I developed to signal the beginning/confirmation of retracement, both optimized on length and trigger level (degree of deviation from mean to start paying attention to), paying attention to which test versus optimize period lengths walk forward best.
Though with discretion, I am now more just looking at the raw level of the indicator and using backtesting to inform how much respect versus caution to give for a given level. I also optimize on period of day, which suggests open to 11 am or so is worthwhile, and maybe the last hour. I look at day of week, but don't have the discipline to not trade marginal days indicated in back test, without confirming that these are untradable with discretion.
I look to get out of a trade when there are a couple of violations of the move. I ignore bar tails, I even make them invisible n the chart, and if a bar opens or closes below the recent low, that's a first violation, and then if a second bar opens or closes down, then I am done. I am ever mindful of the occasional flash crash that comes through like a hurricane every few years. My neighbour mentor who came up out of the Chicago pits got burned more than once holding long positions and will almost never trade long...he only trades short..."markets never crash up", he says.
If a trade moves to the positive, I move my stop up to a tick above breakeven and otherwise let it breath while it is below the CCI zero line. Once it crosses above the CCI zero line, I trail my stop up to just below the low of a couple bars behind, and otherwise look for a couple of decisive violations of the move, closes or opens lower than the previous bar, or one vicious move in the wrong direction.
Otherwise, I try to let the profit run. For shorting the SP500, I am doing all this in reverse on the SPXU. I migrated away from stocks thinking, what will I do with myself once the secular bear market comes? You can't short within an RRSP. Occasionally I back test on the entire array of index ETFs and find a method works better on the Dow lets say, so my attention shifts to UDOW/SDOW.
A couple times I got excited and moved the trading up from 10 shares to 100 shares, but that did not go well, so I quickly return to 10 share testing, which I find 100 times more valuable and motivational, than paper trading. My goal is to move up to 500 share trading incrementally, or move to ES trading. I wonder if trying it this way is much more difficult than learning on ES directly?
My approach seemed to like the summer morning choppiness, and now I expect things are going to be very different with the post Labour Day liquidity returning, learning from that recent video posted. All comments appreciated. I realize I need to start journalling, more trading and less fiddling with back testing. All comments welcome and don't pull punches. My wife has given me to next spring to start making at least $50 a day from this, otherwise I am going to have to do something else!
I assume I can't load a custom avatar until an elite member or have a posting count? I would like to optimize on total profit * profit factor, which I think has a decent tradeoff between consistency and theoretical return, but not sure how to go about doing this without being a C programmer or dealing with the hassle of throwing it into excel, based on forum information. Or maybe this all becomes easier with Elite access downloads? Saw Mike on an intro video use a custom optimize factor from the drop down list, and this caught my attention.
Is there anything liquid and moving over lunch, early afternoons or evenings, that I can research, that I would use an ETF proxy for? Maybe I need to approach 11-3 pm (Eastern) trading as if it is an entirely different instrument and market, just thinking aloud here?
Last edited by kroeran; August 30th, 2014 at 02:49 PM.
Reason: fix typos and clarify
It is interesting that you refer to an RRSP but you do not comment on a TFSA account.
I believe the TFSA is a super account to work with. You don't get a tax benefit putting money into it, you are limited to a $5500 contribution (though if you haven't opened on you can add about $30,500 on the first contribution and $5,500 annually thereafter) , you can make withdrawals with no penalty and if you spend those withdrawals without letting them accumulate any gains in interest or other...then there is no tax on the withdrawal period, and BEST yet you can put that withdrawal + the normal contribution the following fiscal year with NO Penalties. As far as you follow the rules there are no problems.
It is slow to build up but I have high paying dividend stocks inside this tax sheltered account which also give me a decent capital gain (double bubble) and as a result in 5 years of contributions I have about a 90% return and that is snowballing year on year.
My intention is to build the account up to the point where a monthly withdrawal (essentially the dividend returns) will not negatively take away from the account growth....say for argument $1000/month on which I can use for expenses, holidays etc and then in the new year replace $12,000 in the account and add another $5,500 to further grow the snowball.
As an economist can you comment on this approach....I see no flaws but then I may be myopic
On other items in your post I cannot comment on because I don't do that kind of trading but you are right there is no margin allowed in a RRSP and TFSA account.
Nice to see another Canadian on the site.
The following user says Thank You to Underexposed for this post:
It just never occurred to me to use a TFSA this way, and I am a tad embarrassed that I didn't think of it.
That's a brilliant way of making trading profits on equities tax free. I did some reading up on this and they even effectively increase your sheltered limit by the amount of profits, such that any withdrawal, of contributory capital or capital gains trading profit, can be recontributed the following year. wow!
so a full time equities trader in Canada can live income tax free and have free health care, qualify for the complete suite of low income benefits, as long as they put in 5 months on a lake in the summer to maintain residency.
Last edited by kroeran; August 30th, 2014 at 06:28 PM.
The following user says Thank You to kroeran for this post:
Our tax sheltered accounts seem to be a lot less complex than those in the USA.
Even the RRSP is not so bad. I used to think that at 71 years old the whole thing had to be collapsed but now that I am approaching that age next decade it isn't so bad....it collapses alright but in a slow manner, increasing as the older you get through conversion to a RRIF
I am considering doing that now. As a RRSP any withdrawal has a $25 fee associated with it PLUS a tax withheld the amount of which depends on the size of the withdrawal. 10% up t0 $5000...20% up to 10,000 and 30% on amounts higher than that...I hate that because I get that money back when I do my taxes.
As a RRIF, you are forced to withdraw a certain amount 4% at 65...5% at 71...etc. However, the rest of the RIF remains tax sheltered and the money is withdrawn with no fees applied and the taxes are accessed when you do your taxes...not on withdrawal and you can as much as you want...you are not limited by the minimum.
So I am seriously considering conversion to a RRIF...a 4% withdrawal does not bother me...that account produces a higher % for me so I will not deplete the account that way and I like the idea of having no fee access to the money and holding that money without paying tax until tax time.
Yes, our tax rules in Canada seem a lot simpler than the USA
my mom has annual laddered Term Deposits in her RRIF and I have to make sure the cash for mandatory minimum is in her account in December, as well as cash to cover the taxes in April.
I guess the main thing with early RRIFing is whether you are ready to switch from filling RRSP room created with earned income, to beginning the gradual collapsing vector, and if you require withdrawals for expenses or if it is discretionary.
Mostly people think about their life cycle marginal tax rate. Like, if you will be RRIFing on top of a good pension, your marginal tax rate will remain high. If you are using RSP/RIF as main pension plan, your marginal tax rate will be much lower than the tax offset while working and filling the account. Some also have to think about tax implications of inheritance on marginal tax rate mid-RRIF.
If your RSP stash is a big part of your money, have you looked into breaking it out at a lower tax rate by temporarily taking tax residency in a country with a favorable tax treaty? I think the worst exit RSP breakup rate is flat 25%, like if you move to Belize or something, but it may be as low as 15% for a few countries, maybe Ireland, not positive. I seem to recall that Alberta does not have a waiting period to get back on health care.
Well other than Canada pension and now old age pension (just turned 65) I have no other income from other sources....hence no earned income to add to an RRSP. I have been retired for a little over 10 years this way....I had many many jobs in 5 career areas over my working life and did not trust the companies to be around when I needed the money so I found I could salt away more money into an RRSP and it was MINE.
about 20 years or so ago they made RRSP's portable and I could've contributed and had a company add to it too but by then I could not be bothered.
So I think that you agree the CP and OAP are pretty small so my tax rate is very low and I usually manage to reclaim about 70%+ of those withheld taxes on withdrawal from the RRSP....not a rich life but pretty comfortable and relatively stress-free.
I have though of moving to another country for 6 months of the year (winter would be nice) I like France where I do have friends...Ireland sounds nice too...but neither of these are particularly good winter destinations, I don't particularly like Central American countries(haven't really traveled there though). Calgary where I live is pretty good weather wise though getting expensive as far as housing is concerned
yeah, so many burned by companies going under. In Ottawa we had a lot of Nortel millionaires running around who then lost their jobs and pensions.
CPP + OAS + something, usually takes care of need, especially if you are willing to move away from expensive cities. I assume you might be thinking of scaling into fixed income as you get a bit older....as the risk of a bear market builds.
I know a lot about snowbirding and moving to Florida, but Westerners seem to drop south to Texas and Arizona, which are much cheaper. I like that fact that I can be in a Home Depot or Bed Bath Beyond, and they all smell the same and have the same layout as in Canada, I can trust the cops almost as much as the RCMP. Friends and relatives can drive across the border and fly down real cheap. My wife won't go to countries with starving dogs.