Important Notes On
Trading
Do's of Trading
• Do take a long term view. Bearing in mind the power of
compounding, investing early and in securities of relatively stable
earning is better than trying to make short term speculation for
huge profits and taking big risks in the process.
• Do distinguish facts from opinions. You should learn by
gathering more facts and observing the outcome of events, and not
merely basing your investment decision on opinion and trying to
profit from short term speculations.
• Do be familiar with the regulations and risks associated with
each product you are investing in. For example, in share trading,
breaching the trading rules can be costly (e.g. naked
short-selling) and may even constitute a chargeable offence (e.g.
insider trading).
• Do ensure that you are aware of all the transaction costs for
each product you are investing in as it will affect your bottom
line.
• Do read more and get familiar with the terms frequently used
in finance. This will facilitate your communication with your
trading representative or financial adviser representative, allow
you to understand statements sent to you by COP, and make informed
decisions on investments (e.g. reading research reports or company
finanical statements to find out more about the company).
• Do be patient. You should treat securities as long term
assets, instead of looking to make a quick buck. Make sure that you
have the holding power before you buy securities and only select
securities with good fundamentals. Do not invest funds that you
will need in the short term because that might force you to sell
securities at a loss to get the money back, even when you know it
is a good asset that will bring you profit in the long term. It is
good to set aside a budget for different purposes by maintaining
separate accounts (i.e. putting your budget for investment in your
securities trading account as it allows you to track the
performance of your investment easily by calculating your portfolio
profits and losses for you).
• Do cut your losses when you realise you have made a mistake in
your assessment of a particular investment.
• Do exercise your own judgment when you read up on investments.
While trying to get yourself more knowledgeable, you will chance
upon some investment strategies that are innovative and sound
logical but are NOT mainstream. Exercise caution when you decide to
employ those strategies for your own investment. You have to ask
yourself whether you fully understand those strategies and whether
they are applicable to your situation, for example if you have the
resources (e.g. time, money, market intelligence) to employ those
strategies.
Don'ts of Trading
• Don't share your trading password with others. You should not
allow other people to trade using your account. You will be liable
for all trades done through your online trading account.
• Don't invest beyond your means. Ensure that you have the
available capital and means before conducting your investments.
• Don't make hasty investment decisions. Be fully aware of what
you are investing into.
• Don't do naked short-sell. Naked
short-selling is the term used to describe a situation in
which an investor sells shares that he has yet to purchase.
In Singapore, naked short-selling may result in a penalty of 5%
of the value of the failed trade, subject to a minimum of
S$1,000