What is Contra Trading in Share Market?

Do you know what is contra trading? It’s a stock trading technique where you will be given 3 days (known as T+3) to pay up for shares that haven been bought. But, if you sell the shares within these 3 days without paying then it’s called contra trading.

contra_trading

Normally, people will use this technique with the intention to make profit. Let say you bought RM1,000 worth of local stock at RM1 on Monday. On the Wednesday, the price went up to RM1.10 and you decide to sell it off. Based on this, you do not have to pay up for the RM1,000 because you have already sold the stock. In fact, the brokerage firm would credit to you 10 cents of profit per share, all without you depositing money.

It’s a great idea for investors to trade and make profits without upfront capital. However, you need to understand the risks involved, else you would end up buying more than you can afford. Eventually, you will be the loser!

So, please make sure that you never buy something with money that you did not have. If you have RM5,000 in your account, then try to buy at most RM5,000 worth of shares, never more.

2 thoughts on “What is Contra Trading in Share Market?”

  1. if i buy less than what i have, there wont be any risk rite?but wanna make profit big amount only can see big diff cause if too small, some share will only increase few cents. there wont be much profit. btw is there any brokerage fees and taxes if playing contra? thanks.:)

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