Friday, October 9, 2009

Bursa Malaysia teaches Don't Buy And Hold

This is one of the Golden Rules from Bursa Malaysia teaching people how to trade Malaysia stock market.

This is the topic content and my highlight in RED.

The Malaysian stock market is one of the strongest and sometimes most dynamic markets in the world.

While the market has always recovered from falls, the same cannot be said for individual companies. Even during a booming market, some companies can suffer significant losses.

Trade only on an uptrend and sell the poor performers, this will make it impossible to experience a large loss. This is the secret to outperforming the market and achieving a consistently superior return.

Undertake some research on the Bursa Malaysia or in a local investment paper. List three shares that have showed decreased performance recently and three shares that have showed increased performance recently.

Did you get that ? "IMPOSSIBLE to LOSE A LOT" !! What a way to set GOAL in stock investment !! Furthermore, making MANY small loses is as bad as making ONE big lost. As a matter of fact, many small loses may actually be worse because you didn't feel the pain and didn't realize how much you have lost. As in Boiling Frog story.

Compares that with the Number 1 TOP stock investor in the world ...

What they should have said is to Employ A proper Stop Loss Strategy. Aim to be right and learn until you make more correct decisions, that is what the game is all about. But just in case you are wrong, preserve your capital allowing you to 'COME BACK' by adopting a stop loss strategy. When investing in a fundamentally strong business, it takes patience and sometimes ignorance to just buy and hold.

Why does even Bursa make such a bias education ? Well, buffett has said it above. Bursa needs brokers, brokers need money, so Bursa also wants you to buy and sell as much as possible so that you pay them more transaction fees.

Sell it ! Don't Hold ! Else Bursa will DIE !!

Ya right ! You may just as well donate your money to Bursa ....


jason said...

The advice is meant for trader not investor.

Trader buy then sell and take profit when reach certain price.

Investor buy good fundamental stock and sit on it for as long as the stock still have good fundamental.

Usually people are a mix of both.Of course Bursa want you to become a trader.

For me I would not want to be a trader full time. Life is too short to look at ticker tape and LED light flashing across the screen. I would like to buy good fundamental stock, but no money to buy, even 1 lot ,it still cost too much.

Michael Tsen said...

1 lot = 100 units, stock price $1.00 means $100 only woh.

indeed, 'traders' is a good name, I just call it 'speculators'.

jason said...

a trader who dont have a trading plan is called speculator. Usually this people will lose money in the end up like a gambler.

You dont want to be a speculator.period.

For me, the way to earn money, is not to lose money, stealing word from Warren Buffet.To invest in the stock market in the long term is to make less mistake than other, because every mistake cost your money.

There are two kind of mistake,good mistake and bad mistake.It just depend how u respond to a certain outcome.

Let say you are a buy 1 stock and the price dropped 50%,but before it drop to 50%, u set the stop loss at 20%.You lost 20%,but u learn something.You will study why the stock dropped 50% and will not make the same mistake again.You get the money from the proceed and invest in other stock and you make money.You make a good mistake and will not make the same mistake again

Let say you are speculator. Your best friend told u his insider friend's friend said this stock is going up at least 200%.You then put almost all the money in the stock and the share price drop 50%.
Because speculator never sell stock at a loss, speculator will keep holding the share.Speculator also lost opportunity cost of buying a raising price stock beside the 50% drop.You make a bad mistake, because u never learn why the price dropped and you will repeat this mistake again and again until you pokai.

Michael Tsen said...

good comment, I will need to think about this to see if I want to distinguish trader and speculator :)