Enter your email address:

Delivered by FeedBurner

Are You Feeling Lucky, Punk? Contra Trading

Labels: ,

bowedhead-1 Yesterday, we look at trading odds when you do it on a per second, per minute, per hour and per day basis. The odds weren’t too good. Slightly more than 50%.

So when I heard a colleague mentioned that his relative lost $10,000 trading on contra, I immediately thought about the article yesterday on How Often You Watch Stock Prices.

Since the odds of success is 54% for a day to 67% for a month and you can contra in Singapore for three market days so that gives you odds of less than 60%.

Contra trading is basically using the time the brokerages allow you to make payment for any shares you purchase to sell it within the time frame. Different markets have different days for payment so be sure to check if you feel very lucky.

So in Singapore, the rule is to pay for purchase within 3 days, thus if you buy say 5 lots of SIA at $11.30 on Day 1 (Thursday), you will have to pay for the purchase on Tuesday, Day 3 of a business day.

If SIA rises up to $11.50, and you contra it on Day 3, you pocket $1000 less transaction charges. However, if the market goes against you and goes down to $11.10, you lose $1000 plus transaction costs.

In case you aren’t convinced of the danger of contra trading, there is an article about a graduate who earns $80,000 a year but lost $700,000 on contra trading.

The only way you are likely to make guaranteed profits is if you have insider news. And if you trade on that, the people from the SGX and the authorities will be very interested to interview you, slap you with a massive fine and jail you.

For me, I rather read company news, analyze potential companies and buy them at discounted prices (like a big “For Sale- 70% Off”).

Related Posts

Bookmark and Share

Musicwhiz said...
October 7, 2009 at 2:08 PM  

Hi Lemizeraq,

Contra is one of the best and most effective methods - of losing money. Only Singapore and Malaysia have this T+3 settlement thing, whereas all other international bourses go strictly on T+0. So pay up on the day itself or get forced sold.

This is why about 99% of SGX is made up of speculators and punters. Their brokers are laughing all the way to the bank.


Post a Comment


The information contained in this blog is prepared from data believed to be correct and reliable at the time of publication of this report. The authors do not make any guarantee or representation as to the adequacy, accuracy, completeness, reliability of the information contained herein. Neither the authors or any affiliates or related persons shall be liable for any consequences (direct or indirect losses, loss of profits and damages) of any
reliance placed on information provided in the blog.

Shares and financial instruments illustrated in this blog can go down sharply or in certain instruments suffer total loss on the initial investments. Investors are advised to make their own judgment on the information provided and consult their own financial advisors or consultants as to the suitability of the products illustrated to their particular financial needs and objectives before acting on any information contained herein in this blog.