5 things you need to know before trading stocks in Singapore

As a trading representative in Singapore, I work closely with corporations, AI(Accredited Investors) and retailers to fulfil their investment needs. As with all endeavours in life, I believe the key to success is knowledge and action.

We have to understand the inner workings of the markets, before we can expand our knowledge efficiently with it. With SGX plan to transition into high frequency trading and with the recent implementation of GTM(Good Till Maximum)/GTD(Good Till Date) orders, local traders will have more arsenal to deploy from their repertoire.

With the infrastructure coming into place, it should make it easier for new traders to join the trading bandwagon. So here are the five things that we should know before trading stocks in Singapore.

1) Stock trading is risky business. The trading limits you use have to be acceptable to you; do not risk what you aren’t willing to lose.

2) Focus on managing probabilities and emotions. I have come to terms with the fact that human choices are mostly emotionally driven; hence they are difficult to be precisely determined and can only be plausibly predicted with a standard deviation.

Mentally, we should not strive to think of rigid solutions when making trading decisions as the market will not give consistent answers.

3) It is crucial to have our own personal coherent concept of the markets, how they work and the types of mistakes that we believe consistently underlie local investors’ behaviour. Knowing these concepts will enable us to have a more systematic approach.

4) Learn technical analysis. Technical analysis should be regarded as the art of assessing the technical position of a particular security with the aid of several scientifically researched indicators.

A good working knowledge of the principles underlying major price movements in financial markets and a balanced view of the overall technical position offer a superior framework within which to operate.

5) Pick the stock to trade not solely on their beta value, but on their financials and business models. This is to prevent you from trading a dud. With numerous suspensions from small caps recently due to accounting problems, it is better to stay prudent.