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Greed can lead to downfall
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cashiertan
Elite |
10-Apr-2007 21:30
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when playing share financing like me is to have a good and strict cash management strategy. cut it while the losses are small else margin losses will snowball faster than u think.. |
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Livermore
Master |
10-Apr-2007 21:23
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Business Times 2 August 2003 - Playing the stock market with a loan But it comes with risk, whether it is margin finance or share finance. These are just some points from the article. Share financing options are available for those who find themselves a little short on funds but who, nonetheless, want cash in on a chance to fatten their bank accounts. Even for financially sound investors, these options present a viable opportunity to expand their portfolio without putting in so much of their own funds. Finance companies and broking houses here offer services that extend credit for share purchase if, for instance, you put in some cash ot existing shares as collateral. The interest rate charged is usually 5-6% (my margin interest is 6.5% pr annum). All these, however, come with risk and a well heeled investor would do well to become acquainted with what is in the market. Let's say you bought your shares on margin finance. There is a margin percentage (calculated based on the amount financed and market value of purchased shares) and this has to be maintained at a certai level. If the share price drops, causing the percentage to fall below the minimum amount, you would have to deposit additional cash or shares, or sell existing shares to bring this margin perentage up again. For share financing, the fall in share price is a also bad news because the bank can ask for a cash top up if the value of the share drop is more than the minimum threshold allowed. If you still cannot pay up, your financier can sell your shares, as quickly as the same day of notification, to make up the required top-up amount. Margin finance is a way to leverage up your positions, to make your money and shares work harder for you. |
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ultrameg
Senior |
10-Apr-2007 21:22
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Just an important reminder, Trading in shares with a big profit can unnoticely increase our greed. When the crash comes, it will be too late, just like the person who lost $700K. Do not chase, take profit when chances comes Read on http://www.helium.com/tm/221584 |
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Livermore
Master |
05-Apr-2007 11:39
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Hi Tanglinboy, I never read any book on marging lending. Actually it is not "rocket science". To me using the right strategy is important. As I mentioned in my previous posts, when the stock is in consolidation phase, I start to accumulate and not in borrowed phase yet. If you are a bit in borrowed phase, it is still ok. The I just wait for the share price to "break out". Once it (share A) "breaks out", I leveraged up. You can do it once the stock "breaks out" then as the share pirce moves higher, you leverage up one more time. After that, maybe you don't buy any more or you can buy a bit more depending on individual. Even when you are in profit, you cannot over buy. You can get a margin call if another share (share B) you just bought fall into loss even if you are still in profit for share A. I really do not know how much I should not buy to avoid getting margin call. I just monitor my buy limit and my borrowing amount. Once you open a margin account, contra is irrelevant. |
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victorf
Master |
05-Apr-2007 11:23
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hehe...never know there is a jesse livermore here in the forum...though not the real one :) good luck |
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geojam
Member |
05-Apr-2007 11:19
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Most lending inst.provides heaps of literature on margin lending. Knowing how margin lending works is one thing,controlling ur emotions when u have margin is another. |
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tanglinboy
Elite |
05-Apr-2007 10:38
Yells: "hello!" |
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Hey Livermore, What book can you recommend me to read? |
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Livermore
Master |
04-Apr-2007 20:03
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Let's say your first year interest is paid off when the stock reaches 90c. Then subsequently your interests become less and less as your profit grows. |
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Livermore
Master |
04-Apr-2007 19:24
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I can make small losses on another stock and no margin call. As long as no big losses no over buy and my profit is still a lot. |
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Livermore
Master |
04-Apr-2007 19:22
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Hi Ten4one, I slowly averaged up on a stock from 72c - 77c and then a bit more above 80c. After that I did not buy any more. I leveraged up at say from 77c onwards. It is now $1.66. My one year interest was effectively paid off at maybe 90c. So I just ride on profit now. As long as I don't overbuy any other stocks at this stage and make losses on another stock, I will not get a margin call. I used to think that for margin trading you need to go in fast and get out fast. But after I analysed carefully, I realised I can just leave it for long term if my stock continues to go up |
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ten4one
Master |
04-Apr-2007 14:07
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Hi L'more, My own experiences taught me that leveraging on margins required quick action to minimize interest and to prevent margin calls. Therefore, I doubt (at least for me) it is profitable to leverage on the long term hold. As iPunter correctly pointed out the Market could work against you and Margin Call as a result if you stay long term. And you need deep pocket to top-up margin calls along the long-term way. As I've said b4, you do it big if you intend to leverage! That's my own experience. And of course, to each his own. Cheers! |
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Livermore
Master |
04-Apr-2007 12:28
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Hi ten4one, It does not require deep pockets. Actually I explained a few times in my previous post how I do it. |
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iPunter
Supreme |
04-Apr-2007 09:38
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As far as I understand, leveraging up means buying heavily on margin... Which is the same buying heavily on a particular stock, except that financing is obtained. If one does that on a long-term basis (ie. hold), what when the market works against you? The losses would be greatly magnified too. |
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ten4one
Master |
04-Apr-2007 09:19
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Leveraging up and keeping for longterm requires deep pockets leh Cheers!
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Livermore
Master |
04-Apr-2007 07:14
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I have leveraged up and keeping stocks for long term. No fast in fast out:). |
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ten4one
Master |
04-Apr-2007 06:58
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Yes Ultrameg, leveraging is a double-edged sword. You only do it and do it big when presented with the opportunity. When you leverage, time is not on your side. You must adopt 'Fast-In-Fast-Out' strategy before the 'Gap' closed. Cheers! |
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iPunter
Supreme |
04-Apr-2007 01:07
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If one wants to make really big money with the margin facility, trading commodity futures may be a good alternative. (Stocks are child's play by comparison). |
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ultrameg
Senior |
03-Apr-2007 23:25
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Leveraging is a double-edge sword |
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baseerahmed
Master |
03-Apr-2007 23:19
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geojam : sorry if I irked u with that suggestion understood ur message. i don't drink either . |
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Livermore
Master |
03-Apr-2007 22:50
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Hi Geojam, Thanks for your e-mail! I think you take over and post about margin trading:) |
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