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Fellowship of the Shares

i think this scenario that you mentioned has happened to the average Joe on a daily basis.

Personally, i can relate to it. However, when it starts to breakout of consolidation, wouldn't it be too late?

 

Hi j3r0m3,

A friend asked me just a few days ago as he was not sure whether to buy A or B share. Unfortunately he chose the wrong one. He chose A but B went up 5c today. If he had a margin account, what I would tell  him to do is put in 10 lots in A and B as he wanted to buy 10 lots in one of the 2. Have you ever been in a situation when you cannot decide which share to buy?

 

As I explained in my previous posts, I do not borrow money yet during the accumulation phase. But even in slightly borrowing amount it is ok. I only really start to borrow when my share breaks out of consolidation phase. How much you wish to leverage up once the stock breaks out is entirely up to individual. Maybe for a beginner, try just a bit only.

 

Hey Elf & iPunter,

thanks for taking time to explain to me. I guess its really a case of knowing the limits and really exercising discipline.

The market does look good today though.

As for the email addy, i can only hope that the folks at Google do a good job of filtering spam. =/

Do email me though... hahah...
 

 

hey jerome,

concur with ipunter. be very, very careful with margin. you need to know how much you're putting up, and how much the costs and leverage are, what price your margin call lies, and if you have sufficient reserve funds in event of a margin call.

this is a bull market; so practically every counter you buy will be green; but in leaner times, it will perhaps not be as easy. 

and hahahah! yes, i can hear your sigh with regards to the email addy too. :P

 

PS>

Of course, if you can afford it, you can play an appropriately larger amount...

 

 

Hi j3r0m3...

Yes... different-priced counters will incur different margined amounts, but usually one is given a 'credit limit' for the max. margin one can play.

Of course margin comes with a price. It is best to check with different brokers on the interest, but it's usually nominal.

I would suggest that you do not get yourself leveraged too highly...

Say for example, if you love  a certain stock priced $10.00, you should just play one lot, whereupon you will only need to put up $2000 cash (10,000 divided by 5), to play the $10,000 per lot share.

 

oic. i get the gist of it.

however, you say that the margin loan is 5 times the cost of 1 lot, so meaning the loan amount for different counters is different, right?

so what would the interest be? (i'm assuming there is bound to be interest, cos there's no free lunch)

 

Hi j3r0m3...

Margin trading goes something like this...

Let's assume hypothetically that SIA is trading at $20.00. So one lot will cost you $20,000.

But let's say you are the impatient type and want to make money faster.

So you intend to buy  5 lots of SIA, which will cost $100,000, but you do not have so much cash at hand. For the case of CFD, the broker will be able to grant you a margin loan of up to 5 times the cost of 1 lot, ie. $100,000 and you  need only cough out  $20,000 in cash to play  $100,000 (5 lots) worth of SIA shares.

So you see, you are not investing in just one lot although you paid only for one lot. You are actually playing five lots,.

And this is where the danger lies...

Any fall in the price by a certain amount will be magnified 5 times (5 lots). And when the amount you have paid up is insufficient to cover the minimum maintenance margin set by your broker, you will need to top up the initial cash outlay. This is known as a margin call.

 

I am really confident you can make big profits just using a simple strategy with margin loan

 

Haha, Asterisk. You take the words right from my mouth. *puts hand in the air*

 

Sporegal

I qualify to be ur uncle rite?Yes ,i am in my early fifties.Technically,i have not reached retirement age.

But i am working from home---doing share trading/investment.

Are u interested in margin loan as well?

 

Yes, it is.

 

Hi j3r0m3,

I use margin trading more for long term investment. I hardly trade

 

Is that Jerome.png@gmail.com?

 

Hi geojam,

 

Wow! Your mom is 82.... hmmm... lemme guess, you're in your late 50s! Am I right? 

 

hi Livermore,
my email is jerome.png dot gmail.com (paiseh, the spam bots are quite prevalent nowadays)
 

 

hi iPunter,

thanks for the word of caution. I have an idea about margin trading and the trading on borrowed money part. What i don't know though is how and the workings behind it.  

 

 

Hi j3r0m3,

For details on margin trading like when you get margin call and the percentage financing for different types of shares, you can ask Geojam. To tell you the truth, I forgot or don't really pay much attention to what my broker tell me.

 

However I can share with you how I do it. It is similar to how Geojam does it.We average up. The interest is not much compared to your gains. If done the right way, your first, second and third year interest are all paid off before you reach half year. What is your e-mail? 

 

Of course it can be a double edge sword if you use it wrongly. But this is one way where your profits can be really BIG

 

Hi Geojam/ Livermore,

i'm keen on knowing more about margin trading. Could you explain on the process or point me in the right direction? Can i email you guys?