Traders Must Learn to Let Go
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
Loading...
That day was the listing day for an IPO stock. My sister and my wife managed to get allocations. I applied as well but was unsuccessful.
At 8:30 in the morning, I would usually ask clients who received allocations to check and key in their orders if they wanted to sell early.
Some prefer to monitor how far the price climbs before deciding to sell. That IPO was oversubscribed 58 times — far more than the IPO listed the day before, which was only oversubscribed 8 to 9 times.
For the one that was only slightly oversubscribed, sellers could profit more than 100% from the IPO offer price at its peak. I thought perhaps today''s IPO would rise much higher than that.
My guess turned out to be wrong. The IPO rose only about 30% from its offer price, and at its highest, sellers could only gain around 40% from the original IPO price.
Some people feel sad or frustrated when a stock rises higher after they have sold it. Others feel frustrated when their friends profit handsomely, but when it is their turn, they only gain a small amount.
This can be linked to loss aversion theory or prospect theory, where if a person is given two choices — Option A gives them RM25, while Option B gives them RM50 but they must return RM25 afterwards.
Although the outcome is the same — RM25 — more people would choose Option A because of emotions. Choosing B is associated with loss and will trigger a more negative emotional response, even though the result is identical.
In this case, because a trader believes they should maximise their profit, even though they have already made a gain, they still feel a sense of regret.
Perhaps we could call it envy. Perhaps ingratitude. It sounds simple, but not everyone easily possesses a pure heart. If the whole world knew how to be grateful, free of envy, and not easily swayed by greed, there would surely be no wars, and the stock market would truly trade at fair prices based on the actual value of companies.
There would be no more stock speculation or syndicate pump and dump schemes.
That evening there was a Raya gathering, hosted by Tuan Rushdan Nadzir. Although I was somewhat reluctant to attend since it was far from Melaka, and my wife was at home caring for our child who was still unwell, going to the event turned out to be worthwhile.
I got to meet all sorts of new acquaintances — prominent figures in the world of stocks and investing. There were fund managers, research analysts, remisiers, coaches, and many more.
Another area of knowledge discussed was warrants. Not everyone buys warrants because they are easy to manipulate. However, some buy warrants based on the fundamentals of the parent company behind the warrant.
They buy it as a form of leverage that is believed to be halal if the warrant is Shariah-compliant. Nevertheless, they are still exposed to the pain if the price drops. Why can''t many people do this? Because most are easily shaken by emotions...
That''s all for this sharing. If you do not yet have a CDS account and would like us to guide you step by step, head over to:
Learning to let go means not being overly attached to a single stock position. Traders need to be wise enough to sell even before reaching their profit target, or to accept a small loss before it becomes larger.
Emotions such as greed and fear can lead to irrational investment decisions. Successful traders are those who can control their emotions and stick to a pre-planned strategy.
Warrants are higher-risk instruments because they are easily manipulated. However, some investors buy warrants based on the fundamentals of the parent company. New investors are advised to fully understand the risks before purchasing warrants.
New traders need to learn to control their emotions, understand basic technical analysis, set loss limits, and avoid greed when they have already made a profit. Discipline is the key to success in trading.
Becoming a successful trader requires knowledge, discipline, and a great deal of patience.
Open your CDS account today through our step-by-step guide here to start investing in the stock market.
Download the free stock basics ebook to learn the fundamentals of stock investing from scratch.