52 Ways of Making Money in Stock Market - Part 25/52 - Program Trading

What is stock market program trading?

That means you can set your criteria AND an action. If your criteria is met, then the system will execute the action that you have set.

Different program trading can suite different strategy.

For example, sell 2000 LPI share at RM20.10 if it hit RM20.00. When LPI hit RM20, then the system will auto key-in to sell 2000 LPI for you at RM20.10.

If you decided to take profit and sell your LPI share at RM20.00, with this program trading, it will auto key-in for you and you don’t have to monitor and no worry that you will be late.

In some technical analysis, it will have bullish breakout if the price broke the resistance level. Example if the resistance level is RM1.00, then set the condition as buy 10000 shares at RM1.01 if it hit RM1.01.

Technical analysis may give you sell signal if it drop below $0.95. So, you set your criteria to sell when the price it below $0.94.

If you think that if Genting Singapore share hit S$6.00 and sure got a lot of buying interest in Genting Bhd share and is worth buying at RMX, then you can set this. Buy Genting Bhd share at RMX if Genting Singapore share hit S$6.00. With this, you no need to monitor Genting Singapore share price.

Sell ABC share at RM3.50 if it hit RM3.50. Buy ABC warrant at RM1.00 if ABC share hit RM3.50. You may want to switch stock or you may want to do arbitrage.

Benefit of program trading:

You no need to monitor the stocks.

Fast action. The system immediately auto key-in for you when your creteria is met. Without system, you have to manually monitor and I’m sure you will always miss it or late.

No emotion involve. Many people told me they have a cut loss plan but when there is a sell signal to cut loss, they refuse to sell because of emotion. In program trading, you can set your sell criteria and the system will auto do it for you, no emotion involve.

Risk

Price. Imagine you have set sell LPI at RM20.10 if it hit RM20.10. But although it hit RM20.10, but the buyer is at RM20.00 and seller is at RM20.10. You will be queing at seller side and your order may not be done and LPI may drop back to much lower level.

Imagine buy PChem call warrant at $1.00 when PChem share price hit $x. When Pchem share price hit $x, due to nearly to expiry date, PChem call warrant may trade at just $0.97. Your order of buying at $1.00 is higher than market price and you may lose out.

By the time your criteria is met, situation may be different. Imagine you have set a cut loss criteria, but the price didn’t drop and is adjusted lower due to bonus issue or rights issue, then it will trigger your sell order.

Sometimes especially in Bursa Malaysia stock market, many counters are illiquid or low volume. It can be easily being mark up or mark down the price. Therefore the price is not genuine and is just temporary. However, these price movement may meet your criteria and trigger your orders.

Very dangerous especially it is a program sell. Imagine many people have set program sell. If the stock trade at lower price, it may trigger some program sell and cause the stock price to trade lower. Then due to lower price, it may trigger other program selling and it just continue and continue.

It can be quite risky if we don’t know how to use program trading in Bursa Malaysia stock market.

Use it only if you are confident. Check with your remisier or dealer whether your trading program is workable or not. Only set on stocks that you are familiar or you are monitoring. Do not set too long of the program trading expiry date, situation can be totally different or there may be some corporate action.

Which Malaysia online system broker offer program selling?

Some is offering and I think soon all brokers in Malaysia will offer program selling.


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