Trading Manual. The Real Wealth Strategist. Trading Manual. How to Profit From the Volatile Mining, Energy and Agricultural Markets:

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1 Trading Manual How to Profit From the Volatile Mining, Energy and Agricultural Markets: The Real Wealth Strategist Trading Manual

2 Front Line Profits Trading Manual THANK you for subscribing to Front Line Profits. This product came out of my own successful investing in this space. These kinds of investments helped grow my parents wealth. And I know they will help grow yours. My first big winner was a small biotech company testing a new drug. This was a decade or so ago. The drug didn t get approved but it didn t get denied, either. The Food and Drug Administration wanted further study and, with that, the stock price soared. See, the market didn t expect this drug to succeed. So my penny stock went up several hundred percent in a few days. It was like winning the lottery! I jumped up and down. I danced with my daughter. And I took my wife out for a nice dinner. However, I spent many months thinking about that success. A successful drug is the result of thousands of hours of research and testing. Scientists and engineers spend years and millions of dollars trying to find the next Avastin or Enbrel. These drugs are worth billions of dollars but they are the direct result of smart people spending hours thinking and researching and creating billions of dollars of value from their research. That same thing happens in natural resources. A successful mine or oil field is the result of thousands of hours of research and exploration. Scientists and engineers spend years and millions of dollars trying to find the next Oyu Tolgoi or Yanacocha mines that are worth billions. And, unlike the biotech space, almost nobody is looking at these tiny mining companies. That s why we have such a fantastic opportunity. You may have heard about my big winner in the mining space. I bought a tiny mining company called Kaminak at the bottom of the market in December I paid $0.06 per share then sold them in August 2010 for $2.65 each. That s a gain of more than 4,300% in just over a year and a half. Over the years, I was amazed at how many opportunities there are for everyday investors to make enormous gains opportunities that almost no one knows about. As you know, I view these tiny mining companies the same way I view early-stage drugmakers or software companies. They don t have much stuff right now. Almost no assets. No revenue, and certainly no profits. We aren t buying them for what they have. We re buying them for what they could have. Managing money is simple, on the whole. It all depends on the amount of time you have and the amount of risk you are willing to take. I like to think of it as a rainbow of possible investments. At the closer end, we are safe. We take no risk and receive the risk-free rate. That s the yield you can get without risking your original capital. As you move on to higher rates, you must take on more risk. 1

3 At the far end, you have the speculations things like bitcoin, oil wells, drug trials, emerging technology and mining exploration. Things that offer the potential of huge returns but carry huge risk to your capital, too. That s why we launched Front Line Profits: to show you how to do the same thing I did, with the same kind of results! Our Keys to Massive Gains in the Volatile Natural Resources Market The most common reason investors avoid natural resources, based on what I ve heard in my decade-plus in this business, is the same reason I love this asset class: the volatility. The thing we have to remember about these types of investments is the flip side of the horror stories. Can you lose a lot of money, quickly? Absolutely. Investors can and do see their wealth shrink in the blink of an eye. But, as I ve seen plenty of times, you can make massive gains that absolutely crush the S&P 500 when you invest in natural resources. We re going to do just that in Front Line Profits by finding companies that use intellectual capital to discover billion-dollar assets. Just like the biotech companies I mentioned, the kind of natural resource companies we re going to buy invest time, effort and intelligence and turn it into cash. I ve watched dozens of stocks do the same thing. For instance, Canplats Resources surged 2,200% in under year from 2007 to And Pilbara Minerals soared 1,243% in slightly over a year from 2015 to It happens more than many people think. We can and will do it again (and again and again). 2

4 How Do We Pick Our Stocks? So, how are we going to choose which companies we invest in? We ll be using a proprietary guideline that helps us focus on what matters: the Three P s. In addition to helping us find the best companies, equally importantly, the Three P s allow us to move past bad companies quickly and reduce our risk. I ll be honest. There are unique risks associated with investing in small-cap miners: commodity risks, company risks, environmental risks and even civil risks. But the Three P s will help us minimize that risk. We ll find investments that offer us a chance to double our money on their near-term goals the kind of companies that could go up 1,000% or more, based on what they have discovered. That means our short-term (12- to 18-month) goal is to double our money. Our longer-term goal is to make 1,000% or more on some of these companies. The 3 P s: Our Guide to Success There are three other things I look for in every company I consider investing in: people, position and plan. The Secret to Derisking Junior Mining Stocks: The Discovery Curve Now, how do we know the perfect time to buy the stocks that are set to go up hundreds of percent? The key to timing our purchases is what s known as the discovery curve. It s the best way to find a starting point a way to increase our odds of success, to reduce the amount of money we have in limbo and to reduce our risk. Without this starting point, we d have a hard time choosing from the thousands of small-cap natural resource stocks out there. The Toronto Stock Exchange (TSX) Venture Exchange alone lists over 1,600 companies. The chart below shows the typical life cycle of a mining stock. As you can see, it s after a discovery is made that a stock s share price begins to pop. Let s say, for example, the price goes from $0.05 to $0.25. Some investors see that, and they get frustrated. They think they missed their chance to make huge gains if they buy at $0.25 rather than $0.05. But we don t want to own a company in its infancy, when it s $0.05. Just because a company s shares hit $0.25 doesn t mean its growth is over. If we wait until it s made a discovery, we know it has something, so the shares won t linger at $0.05 forever. But here s where it helps to have an understanding of geology: It s slow-moving. So the discovery period can last two years or more. If we buy after the first pop in share price, you can see from the chart how much room the stock has to grow. Investing in a company after it s made a discovery is a great way to limit the number of stocks we re choosing from thereby increasing our chances of success while limiting our risk. Just to give you a better idea of the timeline, we won t typically invest right after the discovery. A discovery will catch the market s attention, so the price of the stock will shoot way up. But then, most stocks ease back down after the excitement. We won t buy right after news is issued. We ll pick up the stock on the downside. Then we ll sit back and wait for our triple- or quadruple-digit gains. 3

5 People particularly the company s management, directors and investors are critical to its success. Small companies are all about people. I know far too many examples of sound business ideas that failed, simply because of the people running it. Ideally, I ll meet with the people before I recommend the stock. That s the best way to understand their experience. If I can t meet with them, I ll research the company s people thoroughly. How Do Warrants Affect a Company s Position? When I m evaluating a company s stock position, one thing that is crucial for me to know is how many warrants the company has issued. A warrant, which is worth one share, is essentially the right, but not the obligation, to buy shares. It s not uncommon for a small company to sell millions of warrants that the buyers can exercise within a stated number of years. The warrants sell for a fraction of what the buyer will pay for shares. For instance, a buyer might purchase 1 million warrants from a company for $0.50 each, which will allow them to buy 1 million shares within three years at $3 per share. This shows the company s confidence in the rise of its share price over time. However, there are two major concerns that I have as a shareholder if a company has millions of warrants that could be exercised while I hold the stock. No. 1, the warrants I mentioned in my example above are likely to be exercised if the share price surpasses $3. That means there will need to be millions of shares available for the buyers of the warrants when they exercise their right to buy shares at $3. A business is like a pie: You can only cut so many slices out of it. So, to give the slices to the warrant holders, a business will need to cut off some of our slice. That means they ll dilute our shares. When they increase the number of shares, ours are worth less. Here s concern No. 2: If the warrants are coming up, the price might stay capped. If I have the right to buy shares at $3, I m not likely to exercise that right if I can simply buy shares at the market for under $3. So, if the date on the warrants in our example is approaching, prices are less likely to raise above $3. That could cause our gains to remain stagnant for an extended time. There are events that can offset the dilution to make it worth our time. And if that s the case, I ll Position refers specifically to the company s share structure. Junior mining companies will sometimes try to pass off land that they rent as their own position. But if that s the case, the land isn t an asset; it s a liability. The only way they can raise money is to issue more shares which can cost us money as shareholders. Plan essentially tells us how we re going to get rich. When I detail a company s plan, I ll answer two questions: 1. What is the company testing? 2. How will that create value? I m not taking a risk in these companies or asking you to take a risk in them unless I m confident there s a good way we can double our money in the next 12 to 18 months. To determine that, I need to see a definite direction and a solid plan. That s how we can make 1,000% on some of these stocks. Simply put, if a company doesn t meet my criteria on all three of the P s people, position and plan I m not going to recommend that you buy it. What Are We Buying? We ll be investing in companies from all over the natural resource spectrum: mining, oil and gas, agriculture (including marijuana), and specialty companies. We ll hold, on average, a total of 12 to 15 positions at a time. That s helpful to keep in mind when considering how to allocate your portfolio but please keep in mind that you don t have to invest in every recommendation I make. You can expect approximately 12- to 18-month holding periods. Our focus will be on small-cap stocks those with a market value under $200 million. Zeroing in on these companies is the best way to 4

6 allow the Three P s to work. After all, it s much easier for a small company to double its share price. A company growing from $200 million to $2 billion is easily achievable and when that happens, that s where we ll see our 1,000% gains! It s easier to limit our risk with smaller, simpler companies. Another thing I really like about them is that few investors are looking at the companies we re considering. After all, mainstream bank analysts aren t talking about these companies. They aren t offering earnings expectations or making recommendations to buy (or hold or sell) companies that are this small. They can also be hard to buy from the States. (If you re an investor in the U.S., don t worry I ll explain exactly how you can get access to these companies. It s not difficult.) But because it requires a little bit of work on the part of the investor, many just avoid them. Finally, it can be hard to analyze these stocks without special access. (Access which I have and I ll share all of my analysis with you.) We will, as you may have guessed, be buying international stocks sometimes. Our junior stocks will generally be listed on the U.S., Canadian and London stock markets. A key to getting the most out of this service will be to make sure you have a brokerage that will allow you to do that. There are brokerages, like Sprott Global, that will trade international stocks on your behalf. There are also online brokerages, such as Fidelity, that offer global stock trading. How (and When) to Buy and Sell Shares So what if a company allows us to check off each of the Three P s, and it s where we want it to be in the discovery curve? Why You Shouldn t Buy Over-the-Counter Stocks It never fails. When I recommend a company that doesn t trade on the U.S. exchanges, I m asked if it s OK to buy from the Pink Sheets or another over-the-counter (OTC) exchange. This is a way for people to buy stocks from exchanges to which they don t have access (for instance, Toronto). I absolutely do not recommend this. The main reason I don t like OTC stocks is because you re not buying the stock in many cases. Instead, you re buying a representation of the company s shares, in American dollars. Then, you ll pay significant fees to do so. This can result in you losing the bulk of the gains you thought you made when you pay the fees your brokerage charges for OTC stocks. The spread (difference between the bid and ask prices) is often wider than it is directly on the stock s exchange. Also, quotes are updated just once a day, impacting buying and selling ability. These are two clear disadvantages for you as an investor. In addition, there are often far fewer shares available on OTC exchanges. That can make it more difficult, and more volatile, to buy and sell your shares. It s best to open an account with a broker that will let you trade on the three exchanges I listed. Please note: Many U.S. brokers will use the OTC symbol, but they are still buying the shares from the correct exchange. If you call your broker to confirm that they are buying the shares directly from the foreign exchange and not the OTC market, you re getting the correct shares. If your broker will not allow you to buy the shares, please don t buy them online. Instead, contact your broker to see what you need to do to get access to the exchange. Or, if they won t work with you, consider switching brokers. I ll let you know right away by sending a trade alert via . The alert will include the company, along with its exchange and ticker symbol, a buy-up-to price, and a trailing stop price. Please stick to the buy-upto prices. Don t chase shares above them. If a stock s price moves quickly, it s better to add it to your watch list and buy it when it falls below the buy-up-to price. 5

7 The best way to ensure you don t end up paying more than I recommend is to set a limit order when you buy these positions with your broker, rather than a market order. This simply tells your broker that you re not willing to pay more than the stated price for shares. When shares fall below that amount, your order will be filled automatically. There are a few things you ll want to do to make sure you re ready to trade. First, you ll need to check with your brokerage to make sure you can buy stocks in the three markets I mentioned: 1. The United States (New York Stock Exchange [NYSE] and Nasdaq). 2. Toronto, Canada (Toronto Stock Exchange [TSX]. This includes the TSX Venture Exchange [TSXV].) 3. London, England (London Stock Exchange [LSE]). Choosing a Broker You can trade stocks on the exchanges I mentioned using certain full-service brokers as well as some online brokers. If you already have a brokerage account, I recommend you start by contacting them. Brokerages have customer service representatives dedicated to answering questions like this. And you re already paying them. Why not let them earn some of the money you re paying? You can often call them, chat with them through their website or send them an . Here are the questions you should ask: 1. Can I trade directly on the Toronto, London and U.S. exchanges? (If the answer to this question is no, I would stop here. I recommend moving the funds you plan to allocate to this strategy to a brokerage that will let you access those exchanges.) 2. Can I do so online, without a broker involved? 3. What are the commission fees for doing so? 4. Can I choose to settle in either foreign or U.S. dollars? 5. What do I need to do right now to trade on these three exchanges? If you need to open a brokerage account, or if your current broker will not allow you to trade directly on the three exchanges, your best bet is to call a few brokerages and ask the five questions listed above. From there, you can explore their websites, fees and reviews to decide which one will work best for you. Then, open your account and start trading. I did some research and discovered that the following online brokerages will allow you to trade directly on the three exchanges: Fidelity, Interactive Brokers and Charles Schwab. (Note: Fidelity does not allow trading on non-u.s. exchanges within an IRA.) More about these brokerages below. It is likely that the brokerage will require approval for international trading for instance, a minimum number of trades made per year or a minimum dollar amount in household assets. Contacting the brokerage directly is your best way to figure out if your personal situation qualifies you to trade on the exchanges I listed. 6

8 Broker Minimum Investment Commission (for online trades; broker-assisted may be higher) Comment Fidelity US$2,500 Australia: AU$32 If trading within an IRA, Fidelity does not allow trading in non-u.s. markets Canada: CA$19 U.K: GBP$9 U.S.: US$4.95 Interactive Brokers US$10,000 IRAs: US$5,000 Fees are determined by volume of monthly trades, country and type of trade. You can avoid fees if the account generates a minimum amount of income for the firm each month. IAB offers both a web platform and desktop software designed with traders in mind. Charles Schwab US$1,000 Australia, Canada and U.K.: Broker-assisted trades are the greater of $100 or 0.75% of principal, with no maximum. U.S.: US$4.95 (online) Foreign stock transactions placed online will be placed on OTC market. To places trades directly on foreign exchanges, they must be broker-assisted. How Will We Know When to Sell? When I issue guidance to sell one of our positions, you ll know. I ll send you a trade alert via . However, you can track your own investments using a spreadsheet. This is what I recommend. You ll know when it s time to sell, because I ll give you clear guidance when I issue the buy recommendation. I use trailing stop-losses for every trade. What do I mean by trailing stops? First, these are not stops that you ll enter online through your broker. Entering your stops with your broker is the equivalent of playing poker with your cards showing. Your stop-loss order is available for the whole market to see. Market makers will run the stops to hit your stop-loss order. Then, the stock will go right back up. To avoid this, we won t tell market makers at what point we ll sell. This information is easy to track with Microsoft Excel or another spreadsheet program. A trailing stop essentially acts as a ratchet. When I recommend buying the stock, I ll advise to the 7

9 percentage of our trailing stop anywhere from 25% to 50%, based on the volatility of the stock and other factors. So, let s say I recommend buying a stock and advise a 30% trailing stop-loss. You buy the stock for $10. At that point, your trailing stop amount is $7 ($10 times 70%). That means if the stock closes below $7, you should sell the next day when the market opens. Ideally, all of our stocks will go up after we buy them. So, in our example, let s say that happens. The day after we buy it, it closes at $ Our stop is a trailing stop which means we ll use the highest closing price during the time we hold the stock. So after the second day of owning the stock, when it closes at $10.50, we ll bump up our trailing stop amount to $7.35 ($10.50 times 70%). If the stock continues to go up, we ll simply track it on our spreadsheet and watch the stop price rise along with it. So, let s say the stock goes up for a while. The highest closing price in the time we ve held it has been $15. Our trailing stop amount is then $10.50 ($15 times 70%). We know we re not going to sell unless the stock closes below $ Now, let s say the stock starts to falter from there. It falls to $14. I won t advise selling, because I follow our trailing stops no matter what. They allow us to keep emotion out of our investing. It s human nature to want to sell our stocks when they re up and hang on to them when they re down, in hopes they ll go back up. But we should do the opposite! We should hang on to the stocks that are going up and sell the ones that are going down. Rationally, that makes sense, right? But we humans don t always do what s rational. Our trailing stops will help us in that regard. So let s go back to our example. Let s say the stock turns around and goes back up from $14. At that point, we re glad we didn t sell. We keep our $10.50 stop in place until it closes above $15 which it eventually does. So we bump up our stop. Now, let s say we watch the stock shoot all the way up to $20! Remember: This is not uncommon with the small-cap stocks we ll be trading. At this point, we ve made a 100% gain! Are we going to sell? No. It could go higher than that much higher. Remember how I said trailing stops act as a ratchet? They do this in two ways. As the price goes up, so does our stop price. It also tightens the gap between our stock price and the stop price. Once we get to a gain of 75% to 100%, I ll advise you that we re going to ratchet down our stop maybe to 20%. And once it s up 150%, we might ratchet it down again to a 10% trailing stop. That will protect the majority of our gains and ensure we don t sell prematurely. One thing I ve learned about natural resource stocks is they will go up or down far longer and far greater than we could ever imagine. We don t want to miss out on the gains these stocks can make. Trailing stops are the best way I ve found to ensure that doesn t happen. How You ll Succeed as a Front Line Profits Investor As you know, our goal is to speculate on small-cap natural resource stocks in order to create outsized gains for our portfolio. Now, a note: Are small-cap natural resource stocks risky? Absolutely. Anyone who tells you otherwise is lying. Their volatile nature is not for all I d even venture to say most investors. 8

10 But it s with the high risk that we ll make unbelievably high rewards. This is the type of investing I m most passionate about. I ve seen enough 1,000%-plus gains that I know firsthand what a huge mistake it is to avoid this sector. Like a 1,080% gain in Magnis Resources. And 1,442% with Lumina Copper. And a whopping 2,365% win with Alexco Resources. You simply have to understand where the risks are. I have to emphasize that these ideas are highly speculative in nature. They are far from guaranteed. Please do not invest your mortgage money here. I urge you to discuss allocation of your finances with a licensed investment adviser before you make any trades. It s key that you make sure you re remaining disciplined in your approach. Each trade alert I send to you will include buy or sell rules. Please make sure you re following these rules. If I recommend buying up to a certain amount, and the stock is above that price, it s best to add the stock to your watch list and buy it when it falls below the buy-up-to price. It s up to you to decide how much exposure to these stocks is right for you. After all, I don t know your personal situation only you do. I ll provide you with investment ideas, and you ll decide which of those to buy. You don t need to buy every stock in the portfolio. This is not a service where it s necessary to own every position. I ll provide you with opportunities as they arise. I ll tell you when to buy, how much to pay and when to sell. If you think the opportunity is worth the risk, you ll invest in it. If not, you can wait for the next recommendation. With all that being said, I want to sincerely thank you for putting your faith in me and to welcome you to the service. I look forward to helping you enjoy trading and making profits. If you have any questions, you can send a note anytime to frontline@banyanhill.com. My team or I will get back to you quickly, and I ll feature some of your questions in my weekly updates. Good investing, Matt Badiali Editor, Front Line Profits 9

11 Banyan Hill P.O. Box 8378 Delray Beach, FL USA USA Toll Free Tel.: (866) Website: LEGAL NOTICE: This work is based on what we ve learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It s your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don t trade in these markets with money you can t afford to lose. Banyan Hill Publishing expressly forbids its writers from having a financial interest in their own securities or commodities recommendations to readers. Such recommendations may be traded, however, by other editors, its affiliated entities, employees, and agents, but only after waiting 24 hours after an internet broadcast or 72 hours after a publication only circulated through the mail. Also, please note that due to our commercial relationship with EverBank, we may receive compensation if you choose to invest in any of their offerings. (c) 2017 Banyan Hill Publishing. All Rights Reserved. Protected by copyright laws of the United States and treaties. This report may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Banyan Hill Publishing. P.O. Box 8378, Delray Beach, FL USA. (TEL.: ) 10