When we start to invest in the stock market requires huge courage putting huge part of our savings into the market. Taking high risk to generate the high return that we all look forward to. 

However, most of us didn’t expect any potential losses that could incur in our investment. Loss is something that we can not avoid. We must learn how to protect our capital carefully like our own child. Placing our capital on the right path in the hope of making more profits from it & most importantly, we can’t lose it. 

With a careful selection of stocks with the right analysis & knowing the right trading strategy suitable for your fund size, you can maximize your profits & protect it from huge losses. Whether you are a beginner or have been trading in the stock market for some time, but still find your trading result is not satisfying enough. You need to join this livestream & let us share with you how to utilize your capital more efficiently & know what not to do with the limited capital that we have. 

We will look into different capital sizes by RM 20k & below, RM 50k & below, RM 100k & below, on what we can’t do & the profit potential with the right trading strategy that is suitable for your capital. 

In this blog comparison we will be our own way of position sizing, if you want to know more about our position sizing & why we prefer this way, you may follow the link below to understand more.

Understand The Cost

Many investors start investing in the stock market with a starting capital around RM 20,000. With this amount of capital, most of us will turn away from stocks per share RM 2 & above. Because you can’t buy more units to cover the brokerage fees & the major reason for investors not to choose stocks within this price range is due to the profit generated is slower. 

Usually 20k will prefer penny stocks, because they can buy more & with a half cent price up, they get more profits.

Example :

RM 5,000 ÷ RM 0.30 = 16,666 = 16,000 units/ 160 lots

RM 5,000 ÷ RM 2.00 = 2,500 units/ 25 lots

When price up RM 0.01, 

RM 0.31 = Profit +RM 160

RM 2.01 = Profit +RM 25 only.

But of course, you will lose more when the price goes down. 

If you are trading this way, you are not 100% right nor wrong. It is true that the profit margin per price tick ( 1 tick means RM 0.005 for RM 0.995 & below, RM 0.01 for RM 1 & above) for expensive stocks. With the above example, the trading fees for RM 2 trade, buy & sell is around RM 50 [ RM 25 each transaction, based on 0.01% or RM 10 whichever is higher ]. Which means you will need to have the stock to move 3 ticks ( RM 0.03) in order to make a RM 25 profit. Unless you are going for mid term to long term holding, then you should be able to cover the fees due to more price up.On the other hand, RM 0.30 trade can cover the trading fees with just RM 0.01 up & with a profit of RM 135. 

With lesser margin to cover the trading fees, it also means lower capital will be difficult to do intraday trading in KLSE. Because intraday trading is different from buy & hold for a few days where the stock price can move higher. Intraday trading most of the time requires us to exit at a very small price difference. Intraday traders will suffer more losses, if the price moves up less than RM 0.03 for RM 2 & above stocks. 

Of course the price fluctuation for RM 2 stocks are higher than penny stocks. So some of you might think that having RM 2 stocks to move higher than 3 ticks in a day is quite achievable, due to price per tick being RM 0.01 instead of RM 0.005 per tick like penny stocks. Don’t get too happy first, we need to look at the down side, if the penny stocks goes down RM 0.01 & we will lose -RM 160 + -RM 50 [trading fees] = Total losses - RM 210. Even though you have a profit from RM 2 trade, let’s say you make RM 0.04 profits from RM 2 stock. Your Net profit will be RM 100 - RM 50 [trading fees] = +RM 60. Total net loss for both trades are RM 60 - RM 210 = -RM 150, you are still losing money in the stock market.

The reason is because the position sizing for each trade is different because the fund allocation for each trade is the same, but you buy more shares in penny stocks & less in RM 2 stock. The profit/loss per tick moves depends on how many units of shares you bought. 

To avoid the scenario like the above, where the profit from RM 2 trades is not able to cover the RM 0.30 stock. We came up with our own position sizing by having the same amount of units for all trades. 

Example :

Starting Capital X 0.4 = no. units per trade

RM 20,000 X 0.4 = 8,000 units per trade

RM 2 x 8,000 units = RM 16,000

RM 0.3 x 8,000 units = RM 2,400

Trading Fees :

RM 2 stock = about RM 65

RM 0.3 stock = about RM 25*
*Minimum brokerage fees, RM 10.

When price up RM 0.01, 

RM 0.31 = Profit +RM 80 - RM 25 = RM 55

RM 2.01 = Profit +RM 80 - RM 65 = RM 15

With the above position sizing, we can still make profits even with 1 tick price up & we don’t have to worry or keep hoping the price to go higher for us to cover the cost. We have no control on how much the price moves, but we can control how much we can profit/lose for every price change in our trades. Therefore, our entry or exit decisions are not limited by the trading fees.

This way of position sizing also allows us to lower the risk in the stock market, protect our capital for not exposing too high risk in penny stocks. Of course the return will be slightly lower than the previous example. Due to fewer units of shares being bought, each tick profit/loss will be lesser. 

But we still prefer this way of position sizing, not just because it can lower our risk, we can achieve better consistency when it comes to profiting in the long run with minimal losses incurred each time & maximum profits when we are in the right stock [depends on your analysis skills]. Furthermore, we are not here to gamble 1 time for a home run hit in the stock market, we are here to master the skill of creating secondary income from the stock market. We are for a life-time, so we need to know how to survive & benefit from the market. 

However, we can’t escape the fact of fund limitation. Even if we can lower the risk exposure, entering a stock price of RM2/ share will take up 80% of our capital, leaving only RM 4,000. Deducting the potential trading fees we need to standby for selling our trades, RM 300 - RM 400. We left RM 3,600 capital available for 2nd trade. Which means, we can’t trade stock with a price higher than RM 0.45 for our 2nd trade. 

The best trading method

Looking at it, it seems like trade intraday with in & out fast trade will be able to free up the fund limitation problem. Yes, IF the market you are trading is volatile & active like some of the US stocks. Or else, you will be sitting in front of the monitor from 9 to 5pm just to wait for the right trade. Even if you are able to make a profit of RM 0.03 per trade each day for 10 trading days a month (assume the other 10 days are offset with losses & profits), you will be making RM 240 per day, 1 month RM 2,400 returns. Average RM 80 income per day in a month, with the same amount of working hours you spend everyday, you could probably earn more driving Grab. 

When we have limited funds to trade in the stock market, we should always treat it as a secondary income source. Therefore, we need to know how to make profits much more efficiently. Quitting your primary income job to trade from 9 to 5 & earn only RM 2,400 is not a wise choice. Therefore, intraday trade will not be suitable for initial capital RM 20,000 & below. 

So we need to find a way to generate income from the stock market with less engaging time & having almost the same return of RM 2,400. So we can have a combined income of primary income & 2nd income from the stock market. 

We can plan our trade in short term trade ( a few days holding period ) or mid-term swing ( Within 1 year holding period ). If your day job is not taking much of your time & is able to spare a few minutes to look at the market each day, then you can look into short term trading. But if you always need to engage in your work, mid-term swing will be a better option. 

Now you know how to choose the right trading method that suits yourself. The next thing we need to know is how to select the stocks that are suitable for our trading method. 

Why repeat others' failures? When we know is not working in the stock market

We are not going to share the widely known by most investors analysis, such as the traditional technical analysis plotting support or resistance line & indicators. We’ve tried that & is not very effective, it is a knowledge from a textbook, can’t really apply or reflect the actual market condition. If you are an academic & not planning to trade in the market, traditional technical analysis is what you need to learn. But if you really want to trade in the stock market, we need to know the big boys' next move. 

You may follow the link below to find out more why traditional technical analysis doesn’t apply in real world :

https://youtu.be/hYzLUGGjVto

Whether you are going for a short term or midterm trade, remember only 1 principle in trading or investment, follow the big boys. We are not referring to following rumours or any news, those are usually released on purpose or are happening. It will be too late for us to react to it. 

Big boys intention will always show in the price & volume movements, transaction data & pattern. All of us have access to this data from our trading platforms, but most retail investors don’t know how to interpret this data to follow the big boys.  

Once you understand how big boys operate & their transaction pattern before every price action, you can maximize your profit potential & minimise the losses by exiting a trade before the big boys throw the price down. You won’t have a problem finding the next entry timing & exit timing for short term trading. 

If you don’t have time to move in & out in a short term but still want to make capital gains. you can look for stocks with big boys accumulation & move in when they are ready to mark up the price. The whole operation from accumulation to price peak could take 3 to 6 months. If you are able to catch this wave, the profits that you can make will be about the same as short term trades, like the examples below :

From RM 0.80 to RM 1.80++ in 2 months after accumulation.

From RM 0.70++ to RM RM 2.4++ in 3 months after accumulation.

Trading method, whether to go long term, mid, or short term, depends on our availability. Select the suitable one for yourself, so you can maximize the potential of it. 

To find out more about how we can maximize the return with RM 20,000 capital & below, join our upcoming livestream on 1st May 2022 at 8:30pm with the link below :

Facebook : https://fb.me/e/1o7sxkpFW

YouTube :

Don’t miss this livestream & learn more about how to select the stocks mentioned above.

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To find out more about our Operator Analysis Pro-Trader Course, visit this link : https://bit.ly/3NVMHfS

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Malaysia stock market is a unique market, hence it requires a customized trading approach to tackle & swerve. Many existing traders in Malaysia apply a plug-and-play strategy from the overseas stock market, but it is not necessarily the best strategy to trade in KLSE. This is due to the difference in local and overseas stock market regulation and the size of market participants of institutional funds & retail investors.

“True traders react to the market.” is the backbone of our trading method. Our findings and strategies are developed through years of trading experience and observance of the operating style in Malaysia’s stock market.

Trading Account Opening

They are offering an IntraDay trade brokerage rate at 0.05% or RM8 whichever is higher for day trading stocks RM 50,000 & above-transacted volume (buy sell the same stocks on the same day). Buy & hold at 0.08%or RM8 whichever is higher.

Open a cash account now at the link below :

https://registration.mplusonline.com/#/?drCode=R311

As Kelvin’s trading client, you will be exclusively invited to join Kelvin’s weekly webinar and telegram group. Click here to join.

For more inquiry contact him by email: kelvinyap.remisier@gmail.com or 019-5567829

If we have missed out on any important information, feel free to let us know and feel free to share this information out but it will be much appreciated if you can put us as the reference for our effort and respect, thank you in advance!

This blog is for sharing our point of view about the market movement and stocks only. The opinions and information herein are based on available data believed to be reliable and shall not be construed as an offer, invitation or solicitation to buy or sell any securities. Round & Surge and/or its associated persons do not warrant, represent, and/or guarantee the accuracy of any opinions and information herein in any manner whatsoever. No reliance upon any parts thereof by anyone shall give rise to any claim whatsoever against Round & Surge. It is not advice or recommendation to buy or sell any financial instrument. Viewers and readers are responsible for your own trading decision. The author of this blog is not liable for any losses incurred from any investment or trading.

To find out more about our Operator Analysis Pro-Trader Course, visit this link : https://bit.ly/3NVMHfS