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Tuesday, June 14, 2011

Should we que or just get it done while buying or selling in Bursa Malaysia Stock Market?

When we want to buy stocks, should we just buy or que a bit lower. If we are selling, should we que higher or give to the buyer.

There is no fixed answer, but let us at the factors.

Buyer que at RM2.99
Seller que  at RM3.00

If you buy at RM2.99, you will save ONLY 0.33%.
If you seldom trade, what is 0.33% to you, very little. Imagine if you que at RM2.99, you may not be able to buy it and the stock price may goes up to many percent. So, you save 0.33% but may potentially lose up to 33% or 333%.
However, if you trade very frequent, then 0.33% on each trade can end up to many percent.

Opportunity Gone
The above example shows, by saving 0.33%, you may miss out the stock.

No benefits, why wait? Not worth waiting.
If you want to sell and que at RM3.00, what if the stock price shoot up to RM4.00. You have no benefit, because your sell order would have been matched /done at RM3.00. you only make extra 0.33%. But if the stock price went lower, eg RM2.90, then you got no choice but to sell at RM2.90.

Bargaining power.
The above example shows if you really need to sell (eg desperately need money), you have no choice but have to sell even the price has drop to RM2.90. Therefore, do not que. But if you can wait, you may wait till the share price rebound back to RM3.00.

Opportunity Cost
If you que the sell order and it is not done, and may take many days or weeks to get it done, then your money will be stuck there. If you sell it immediately, you may use the money to buy other shares or put in trust account or bank to earn interest.

Average out.
If you are buying, and if you already have many of the same stocks, then you can wait. Doesn’t matter if you miss it and the share price goes much higher, you can still be happy because you already have the stocks. But if you don’t have the stock, then better not que.

Same thing for selling. If you have many to sell, why que? Sell some first.

Volume or liquidity
If the stock has high volume, can consider to que because the chances of getting done is much higher.

Wide spread or percentage
If the spread is,
Buyer queuing at RM2.85
Selling queuing at RM3.00
Then it may be worth queuing. Because the difference is not 0.33% anymore, it is 5%.

Buyer at RM0.07
Seller at RM0.075
The difference is 6.7%

If you have big quantity to sell, then you may que some and sell some, and progressive selling and queuing throughout the day. This is because if you sell or que all at the same time, you may push down the share price significantly.

Happy Factor
If sell at RM2.99 but are not happy, and by selling at RM3.00 makes you happy, then better sell at RM3.00. So that you can tell your friends that you sold at the price that start with 3. Or because your cost is RM1.50, so that you can tell your friends that you make 100%. Investing in stock market should be happy.

As you can see, whether queuing or just straight buy or sell has no fixed answer. We should evaluate the above factors before making our decisions.

As for me, I normally just buy and sell without queuing. Because I feel that by saving 0.33% is not worth if I may miss out on the stock.

I know some people are queuing at the buyer side to buy and queuing at the seller side to sell in the same day just to make that little percentage, because if repeats for many times it can be substantial gain. But that need hard work.

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