Tuesday, February 23, 2010

Contra trading

Recently I told someone that I contra off a position. That person seemed very shock that I do such risky things. Maybe that person had read many newspaper reports of students contra-ing and making big gains and eventually bigger losses.

Contra need not be risky. I put it in my newbie's faq a long long time ago about the topic on contra. Basically contra means doing a round trip of buy and sell before T+3. This means that you can buy a stock without putting in any money, then proceed to sell it off by the settlement date of T+3, thereby profiting from the proceeds.

Sounds good right? It's hard enough to get into a counter before it moves up, let alone restrict it to a time limit of 3 days. This foolish game will be made even more deadly if you buy more than what you can afford. For example, if you own $5000 but you bought $10,000 worth of shares with the hope of contra-ing within the next 3 days, you better be a very sharp trader. Otherwise, you have to sell $5000 worth of shares because you can only afford half of what you bought.

Usually contra players are also breakout traders. The explosive moves associated with breakouts is suitable for the very tight time limit for contra trading. Please don't try this if you're not up to it - it's a quick way to lose your pants. How do I know? I've contra-ed HSI warrants before, to the tune of 20-30 lots each time. I won't do it again, it's too stressful and exciting for me now. But I've NEVER bought something with money that I did not have. If I've 5k in my account, I would buy at most 5k worth of shares, never more.

So is contra risky? Yes of course. But for my recent trade, I happened to buy and sell something within 3 days. I didn't plan to sell it in that short period of time and most importantly, I've the means to hold it longer than the contra period.


Createwealth8888 said...

Don't confuse unintentional contra trade with contra trading. For contra trading, the trader will take big positions to profit or loss on small price movement. Know the difference

la papillion said...

Hi bro8888,

Ya, you're right.

I don't do contra trading these days anymore. I don't suggest anyone to try doing it too, it's just too many things to handle in too short a time.

financialfreedom said...

I love the picture of the game. Is it called contra?

Used to play it when I was young!

The rule for contra is simple. Just make sure that you actually have money to buy up the stocks in case T+3 comes and the stock price is still down.

The times that I tried contra, I usually lose money. Time is just not on your side and 3 days is too short for anything to happen.

Musicwhiz said...

Avoid contra at all costs. It's hazardous for your wallet.

la papillion said...

Hi FF,

Yes, that game is called contra - I've played it before and used to enjoy it too :)

Playing contra on console is fine, but doing that in the market really test your skills. I suggest don't even try.

la papillion said...

Hi mw,

True. It's good for intraday traders only, not for those who have a job to do.

I cease contra trading already, too stressful.

Dou said...

u just post my fav game contra!!

I can clear all in 1 life hahaha.

Anyway singapore got a lot of ppl play contra one. Just looking for quick money.

la papillion said...

Hi Dou,

Wow, so good ah, can clear all in 1 life? I need to cheat haha

Contra trading is deadly, esp when they punt more then what they can afford. The worst scenario is when a newbie who just entered the market win some money. Then he will start thinking that the market is so easy to earn money, don't even have to put in capital and can get back money.

That's the start of a very bad journey in the stock market. Newbies beware!

Grey said...

Weow...! I didn't know there are so many Contra(videogame) players here! It's nostalgic to see the last king picture man!

la papillion said...

Hi Grey,

Long time no see :) Haha, nostalgic eh? I like contra too - the game I mean :)