Showing posts with label PROTON. Show all posts
Showing posts with label PROTON. Show all posts

Wednesday, 19 February 2014

A past experience, a reminder to myself

There are several types of stock account. One of the most common is a cash upfront account, in which you are only able to buy shares with the money in your trust account, i.e. trading limit = cash available. Another common one being the margin account, which allows you to trade, e.g., 2X based on your cash available.

Having mentioned margin account, once I saw a "joke" in Investalks, saying that for those working in Singapore, they don't even need to have a margin account to trade 2X of the cash available, because what they are earning already has the marginal trading effect in Bursa Malaysia. Kind of cold jokes, but it reflects how the continuous depreciation of MYR erodes its value against other currencies.

Back to story. When I opened my account, I opted for cash upfront account. I know that, deep in my mind, this will prevent me from "gambling", as my weaknesses will be completely reflected in stock market, of how greedy I am, of how uncontrollable I am, of how unsatisfied I am, when the crucial moments come. By only forcing myself to use cash upfront account, I can avoid gambling on trading limit which may be over my financial affordability.

This decision DID save me from some losses. Back in 2011, I have a cash value of about 10k in my account. It happened at that time that PROTON (now delisted, took over by DRBHCOM), came the news about take over by DRBHICOM. Read a related news here.

Due to the news, PROTON gap-up open on 6 Dec 2011, from RM 4.50 previous close to open at RM 4.75. Its call warrant, that I was aiming at, PROTON-CG, open at RM 0.430 from a previous close of RM 0.370. Seeing such a strong positive sentiment, I plan to hantam (ALL-IN) all my cash to buy this call warrant.

PROTON-CG


I remember vividly that, I key in BUY RM 0.435 for 250 lots. ORDER DECLINED. I don't know why the order was declined. I tried a second time IMMEDIATELY (such a rash decision), same amount same price. ORDER DECLINED. Only then I calculated the total amount I wished to trade = RM 0.435* 25000 = RM 10875, which is over my trading limit for about RM 1k. I gave up buying.

Soon after that, PROTON turned from green to red, and PROTON-CG closed at RM 0.315 on that day. Had the transaction been successful, I would have suffered a loss of 3k in a day. Although it has gone up finally - 1 month later, I wouldn't have waited until that should I have the call warrant, I would have cut lost on the first day of my purchase.

My cash upfront account SAVE me from the loss. Of course, it did "prevent" me from some earning, but using margin trading limit for me is risky currently, as I am still learning how to control myself. In addition, past experience has shown that even though I may win some money at first, I might have lost even more at a later stage due to uncontrolled trading. I still feel comfortable using this cash upfront account. The feeling of "not earning enough" abates as my experience accumulates.

This experience also proves the well-known quote "buy on rumours and sell on facts". When news have already been announced, don't chase, is time to sell if you hold the shares. Anyway, this is an experience for me to remember, which will hopefully remind me to avoid the similar mistakes in the future.