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Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
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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.


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