High risk in return for high gains is the buzz word when investing in speculative
issues. As a player in the casino-style Second Board, you should not agonise too
much if your investment value drops by 40 cents within few minutes of your acquisition.
Clearly, it is very difficult for one to monitor the volatile movements of speculative
issues. You will need to keep additional funds for your every purchase. Set limits
to your investment commitments.
Reduce your position if a bad situation persists. If you are under-margined, you
may be forced to liquidate your position at a costly loss if the market reacted negatively.
In short, know your limitations. Although it is hard to resist "quick"
money, you should not be too ambitious and take on almost all the market tips.
Admit your mistakes quickly if the stock that you have just bought went down sharply
in price instead of going up as you had originally anticipated (in contrast to the
tip that you received). It is always preferable for you not to hold and hope for
the stock to turn in your favour when investing in speculative issues. In particular,
for a "contra" player, holding a losing position for a speculative issue
priced at say, RM 30 or above for a few days could be detrimental to your investment
even if there was a slight chance that the price may rise.
You should not form new ideas when you are trading in the market. Try to formulate
a basic opinion before the market opens. Do not let your friends, or any source of
rumours to distract your trading rhythm when the market is running. When you make
too many decision changes, you could lose direction and end up losing more.
Stay away from the market if you are totally unsure of what to expect from the
market. Develop patience and wait for the next opportunity. Your action should support
your words that is, you should not buy when you are feeling "bearish",
and vice-versa. If you have established a position, liquidate it if you are beginning
to feel uneasy about the stock's prospects - signs that indicate the price is gradually
moving downward. Act promptly!
Know the price trend that you are trading. By looking at a simple bar chart, one
can generally get some feel of the direction of the stock. Since speculative issues
do not normally follow fundamental developments such as announcements of corporate
news or dividends, you should look for various technical indicators.
In addition, you should never invest heavily at one price level. Spread your buying
gradually to counter any unexpected downfall. If you have identified a stock that
has excellent upside potential, try not to bargain too much in hoping of getting
the lowest price possible. If you do, you are likely to see the bullish trend slip
away. Being able to buy at lower price does not necessarily signal that you will
make more in the future.
In conclusion, investment in stock market has both its advantages and disadvantages
depending on your risk profile. Investing in stock market always carries higher risk
than the traditional property investments and saving with banks (fixed deposits).
One should always remember that high gains comes with high risk. For all the "contra"
players, remember that anything that increases sharply will plummet just as easily
and there is no such thing as "guaranteed" profits.