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Making quick money in day trading in the stock market! kcchongnz
Hello KC Chong,
I just started work and hope to build up my fund investing in the stock market. However, I do not have much saving now. Recently, a good friend who has been in the market for a few years mentioned that I need to build up my fund fast to have meaningful return from the stock market. He advised me to borrow some money and use that to do day trading as the market is currently suitable for day traders. So, I followed his advice and guidance in day trading. The first day I made about RM3000 because the broker heard wrongly the number of units I wanted to buy, and I was so happy. But then the next few days, I lost around RM5000++, I felt so lost.
Do you hold any investment course so that I can learn the proper way of investing?
Best Regards,
John
Please note the content and the name above were changed to protect the privacy of individual, but the message is the same.
Hi John,
You may invest in yourself by purchasing some of the investment books in the market to acquire some knowledge in investing. One of the books is titled, “Invest like a stock market guru: the complete value investing guide that works!” by KC Chong.
Just for a few tens of Ringgit, you may be able to learn almost everything in fundamental investing, the right path of investing. It may end up as your best investment in your life.
If you are interested to purchase a copy and mail to your address free, you may contact me at
But first, I must make it clear to you. This book will not help you to make money in your day trading. Not a little bit at all. I sincerely believe there is also no other way, even those specifically mention that they guarantee to help you get rich quick from day trading. But quite to the contrary. In life, to achieve certain things, you need time. The good news is, being a young man, you have the time.
In March 2020 when the first phase of Movement Control Order (MCO) was implemented due to the threat of Coronavirus, Online broker Rakuten had more than 11,000 new accounts activated, a 100% increase from the previous month. On 18 May 2020, Bursa posted a record 11.2 billion shares worth RM4.4 billion traded. Individual trades made up a big proportion of the total trades. It is not difficult to see that many of the trades were done by day traders working from homes during MCO.
Day trading in the stock market is the buying and selling of a stock in a single trading day. Day traders enter and exit stock positions frequently to profit from the short-term movements in a stock's price. Some hold positions for hours, while others hold stocks for minutes or even seconds at a time.
Figure 1: A daily stock price chart
With a computer, day trading is so easy nowadays. You switch the computer on and go to the trading platform. You find that the stock at its lowest price at about 11.20am (blue line) as shown in the price chart in Figure 1 above, and you just make a few clicks and you have bought the stock in a minute.
You then glue yourself to the screen, when your stock goes up 10 sen at about 2.15pm (red line), you make a few clicks, and you have sold your stock and made a few thousand Dollar. Repeat that by buying at the next low at 3.00pm (blue line) and sell before the trading day closes, you have made another few thousand Dollars. It is so easy to make money. The world is so wonderful.
The big problem is, when you are doing the trading, you will not know where the blue lines and the red lines are and when they will appear. You only know after the fact! So, often, you would be licking your wounds and complaining,
"If I had gotten in here, and gotten out there, I would have made a fortune, instead of losing as it is."
Day Trading Success Rate
Most people would have heard success stories in gatherings how people brag about making so much money in a day speculating in the stock market. Many also bragged about how they achieved it with margin. Who would tell you he has lost money? It is disgraceful to tell you they lose money.
What is the fact?
Brad M. Barber and Terrance Odean in their paper “The behaviour of individual investors” confirms that collectively individual investors trading on their own under-performed the market. Many of them lost their savings completely. The underperformance was due to information asymmetry, overconfidence, failure to diversify, easily influenced by rumours, tips, media and internet forums etc., and last but not least, sensation and action seeking day traders, going in, make few cents, and out, and in again, but eventually lost a bundle when some of the stocks tanked abruptly. They do the same thing repeatedly.
According to another academic research by the same authors in May 2011 for the Taiwan Stock Market, “The Cross-Section of Speculator Skill Evidence from Day Trading”, only about 13% of day traders earn a net profit in any given year. Even worse, less than 1% of day traders are consistently profitable year after year.
The main reason being the various to-and-fro transaction costs due to frequent trading activities. The other reason is day trading is a speculative activity which is a zero-sum game. Winners make from losers. It is not difficult to imagine when individual day traders are up against the big boys in the market, who would be the patsy. There are many syndicates, manipulators, and other big-time traders who have the financial, technical and computer power in the market, all trying to profit from each other. The odds against an individual day trader is huge. It is a no-brainer that it is a loser’s game for individual day traders. My own personal experience in day trading told the same story.
Focus on investing
Figure 2 below shows the long-term return of the broad US market.
Figure 2: Long-term return of S&P500
Over the short-term, anything can happen in the stock market. I am sure market participants would have known well for this year in 2020, with its high volatility. However, over time, the market is always in the uptrend as shown in Figure 2 above. Historically, the broad S&P 500 Index has rewarded investors with compounded annual rate of 10% over a long period of time-- even when factoring in the bad years. That has been a very decent return compared to other alternative investments.
If you can save RM5000 a year now increase your saving every year by 4% when salary increases, and earning 10% compound annual returns (CAR), you would have accumulated RM2.2 million by the time you retire at 60. Figure 3 below shows how your saving grows from year to year in an exponential way. Well, not necessary making profit every year as there are ups and downs in annual returns, but at a compounded annual rate of return.
With the growing Employee Provident Fund, plus your saving and investment in a safe manner above, your total retirement sum can to a handsome RM4-5 million at age 60.
The notion that if you just starting in investing, you do not have much bullet and you need to build up that war chest quick in order to invest for long-term has a lot of flaws in it. You may end up keeping on losing money and wasting many years to build up your wealth. Start whatever little excess money you have now to invest, not do day trading and hope to make a lot of money in the short term. Often, it ends as, just hope. Using the principle of time arbitrage and compounding and following the right mindset and a proven successful investing process is a more reliable way to build long-term wealth.
If you wish to invest in the stock market without much capital, knowledge and experience in investing, you can do passive investing to select a well-diversified low-cost ETF or an Index fund in US and the global market. You would expect to obtain a decent return slightly below 10% over the long-term.
For those who wish to earn a little more to invest on his own, or carry out active investing, there is no other way except to spend some time and effort to learn about the fundamentals of investing. With some practice and experience, and following a right mindset and a proper process, I am quite confident that they can do better.
There is an interesting article in the latest The Edge magazine for the week of June 1 to June 7, 2020 discussing about passive and active investing written by Kuek Ser Kwang Zhe. A good read for you.
Remember this,
The above is just my opinion, and what I have read about and encountering many people who had gone through that before, and also include my own personal experience. If you still think day trading is the way to go, it is your choice.
Best of luck and stay safe, for protection against Covid-19, as well as your investment.
KC Chong
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Discussions
1 person likes this. Showing 18 of 18 comments
The more of these day traders whom do not even know what is really share invest jump into the market, the nearer the end of Bull.
2020-06-05 21:33
John, don't be disheartened. I know a trader who make 11m contra profit oledi during the pandemic...
2020-06-05 22:11
John, listen to my advice...better invest long term in excellent stocks than day trading. 99% loss money, only one made 11m and a few earned few thousands, the rest all still bearing the pain of losing most of their savings on day trading on stock market.
2020-06-06 01:16
Posted by paperplane > Jun 5, 2020 9:09 PM | Report Abuse
Makingg quick is fun, fei zai
A agree. There is a lot of fun making $1,000 one day, $4,000 next day, $10,000 the next etc. Those are good news.
The fun stops and pain comes when suddenly you lose $50,000 in a morning.
The pain grows when next you try to make back the losses, but instead, lose another $100,000.
Those are bad news. Unfortunately, that is closer to reality.
2020-06-06 08:58
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
John,
Here is a simple guide:
1. Know yourself
What is your investment objective? Maybe grow your wealth 10% or 15% per year
What is your time horizon? Maybe 5 years or 10 years.
What is your risk tolerance? Will you be having sleepness nights when your portfolio drops 10%, 20% or 30% over a short period?
2. Know your investing philosophy
Learn from Buffett
Know the business you wish to invest in for the long term
Business must have durable competitive advantage
Business with honest managers who are capable and hardworking
Of course, buy at a fair or bargain price
3. Know the difference between investing, speculation and gambling.
Please refer to investopedia.
4. Know the games you wish to play in.
Zero sum game: trading, gambling
Negative sum game: trading frequently in stock market, gambling in Genting
Positive sum game: Investing in great companies at fair price for the long term.
2020-06-06 09:28
“Invest like a stock market guru: the complete value investing guide that works!” by KC Chong.
Strongly recommended
2020-06-06 09:32
Inexperience trader should not be day traders, you should learn more TA and FA skills till you can see the uptrend / downtrend of a stock. Experience day traders can earn easily 300 to thousands / hundred thousands depend on your capital. If not greedy, can earn a living by day trading, gaining few hundreds a day in the down trend market. For bull market, it's more, but only for experience sifu.
2020-06-06 13:30
I trade the markets for a living, I could hold trades anywhere from 3 secs to 3 weeks... I'd say the biggest enemy of a short term trader is boredom... If you want to be profitable, you must have the discipline to stick with your own methods that have tided you over the worst of waves.. That means the patience to wait for the right setups, which may or may not be the play of the day..
This market has proven the best economists wrong - they were all expecting a W shaped recovery and are now clamoring to get in after the huge breakout of resistance
I'd say going forward, this is going to be a global bull run of epic proportions - a recovery play and will be an excellent trader's market
2020-06-06 14:28
Posted by dxbman > Jun 5, 2020 10:11 PM | Report Abuse
John, don't be disheartened. I know a trader who make 11m contra profit oledi during the pandemic...
The great Jesse Livermore was the legend in the history of trading in the stock market. No one is even closed to his prowess. It is good to find out the beginning to the end of this great trader in the book,
Reminiscences of a Stock Operator
Many believe this book was written by Livermore himself.
2020-06-06 17:39
Reminiscences of a Stock Operator, written by a reporter :
is the only BOOK all successful hedge fund managers old n young swell at it.
Learning from the original successful wall street operator is the 1st lesson all who want to succeed in stocks must read!
My friend the multi-millionaire is # 1 stockist in msia. He's the exact replica of jesse livermore.
Story 1:
On the v 1st day of airasia listing my stockist friend made a HUGE pile.
I went to his house n asked him how he made it.
Airasia ipo price was at i guessed 98.
So on listing day there were lots of selling of this big plc.
My friend said he trained himself the talented skill to read n remember all the buy n sell queues from 9 am to 5 pm of a stock.
There were super BIG sellers Q to sell at 98.5 n 99.
He said, at 98 price the buyers kept coming everytime when big sellers threw at it = i.e. the golden setup for him.
At abt 4 pm, he decided to take that all important RISK. He walloped all the BIG sellers at 98.5 n 99. All eatened up by him alone, n airasia flied like crazzy.
Now we know pple called him super rich TIGER.
Jesse Livermore had NO formal education. At tender age 16 he was a price marker like my friend always running across the board to update stock prices.
Livermore is still the world # 1 stock trader on record after adjusting for inflation.
He knew nothing abt FA. Many insiders conned him into the game. That forced him to switch line to commodity, yes cotton trading.
He was superbly successful in stocks but in cotton he took his life finally.
MORAL:
i. All traders must learn some knowhow in FA.
KC Chong I believe is a good passionate teacher n his fee is so little.
ii. 2 parts
a. Right Stock Selection
Buy WHAT mr market wants to play UP
by knowing how to read newspaper to identify the right stocks in play.
b. Right Timing
There r 2 cycles per year on klse.
MACD is abt 99% accurate for all great winning stocks.
If not, that stock is lousy stock.
2020-06-07 02:36
what is the difference here and going to a casino. just invest in brick and mortar
2020-06-07 09:42
Quickly, different methods of investment.
1. Old woman method
A woman at England retires and starts investing GBP5,000. When she dies 50 years later, she has grown GBP5,000 to GBP20,000,000. She never invested additional capital, besides using dividend received.
Her strategy is to buy and hold products that she likes. If she likes a brand of stockings or a brand of chocolate, she would find out is it listed and buy using dividend received. Someday if she suddenly doesn't like it, she would sell it.
Example for amateur Malaysian investor, say if you like astro, then you buy astro stock. One day you discover a TV box is better, then you sell astro.
(In investment, we need time to succeed. If you really want to speculate, 3 days is too short, maybe 15 days is a better timeframe, tremendously increase your odds).
2. Peter Lynch.
The legendary fund manager Peter Lynch retired and starts a investment club for kids.
The rules are simple, kids need to tell a story.
Kids would present their story before they select a stock, say they prefer a pencil, and the reason behind.
It turns out kids were performing better than most fund managers.
3. Follow sifu.
Before you follow a sifu, you need to look at their track records.
The Mr. Coldeye, if you read his earlier book and see his stock selection, I track and found 70% of his prediction were wrong. However, even if he is wrong, 70% of the result of the wrong prediction will just be mediocre.
If you look at KYY, maybe his pick is less than 30% successful. But then more often the 70% of the result of the wrong prediction is devastating.
If you look at icon8888, even ABMB didn't rise, but his prediction is correct. So, even if you are right, maybe the market won't react fast enough. Again, you need time.
OTB? I am not saying he got poor skill, but no investment guru takes subscription fees.
4. Warren Buffett
Warren Buffett talks about a lot of things, sometimes its hard enough to understand what he said, but to summarise, a company that is undervalue.
To determine the value of the company, you need to look at structure of the industry, capability of the management, and he will help direct the direction of the company.
5. TA
Most in the market are fake TA. A Good TA will short crude all the way from USD147 to USD20 and long all the way from USD25 to USD80.
(I am saying the recent oil drop from USD60 to -USD40 is solely due to a China attack. They short all oil stock available from usd20 to -usd40 overnight. Luckily they didn't succeed to overthrown the financial system, oil quickly recovered. Otherwise they will attack other financial products such as USD bills)
(So now oil basically ting tong USD40-60. USD40 you long, USD60 you short).
6. Joe Terranova
Joe says, you can still win big after the result is out.
You don't need to speculate the result, wait till the result is out then you go in 100%. If it is good, then long, if it is no good, then short.
(Go for 3 months, not 3 days).
7. Investment theory evolves.
2020-06-07 11:22
Raider says making monies in stock market through trading is hard and u want trading some more loh.???
If u want to be a trader u can follow the sound advice by purebull loh;
MORAL:
i. All traders must learn some knowhow in FA...this allow u to select something that is sound with substances and with margin of safety when u trade, speculate or invest loh..!
KC Chong I believe is a good passionate teacher n his fee is so little.
ii. 2 parts
a. Right Stock Selection
Buy WHAT mr market wants to play UP
by knowing how to read newspaper to identify the right stocks in play.
b. Right Timing
There r 2 cycles per year on klse.
MACD is abt 99% accurate for all great winning stocks.
If not, that stock is lousy stock.
Underlying Momentum of the stock is very important for a fast buck loh....!!
c. Do not day trade loh..!! Leave it to the day trade professional traders or stockist, it is very difficult to beat them on day trade mah...!!
2020-06-07 12:18
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
paperplane
Makingg quick is fun, fei zai
2020-06-05 21:09