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  • Writer's pictureFaron

Trading Limit, Outstanding Summary, Settlement Cycle

Updated: Oct 11, 2020

When you plan to buy or sell a share, you need the "LIMIT"


1. How to calculate Limit

Without limit, buy order will be rejected. So how to calculate your limit?


Limit is based on your collateral, it is your CASH and SHARE

The Bank will give you limit based on 2 X cash and 1 X paid up share. Cash or share can be a collateral that allow you to buy more share and pay later on T2. if you unable to top up the outstanding, Bank have the right to sell your share, to cover the outstanding, this is why, bank only give 2 times of limit, and will not give extra limit to avoid huge contra losses.


When you deposit RM 2000 into your trust account, you will have RM 4000 to buy share. If today 1st AUGUST (T), you have buy a share more than your cash, eg: RM 2500, the extra RM 500 will be need to settle after 2 days 3RD AUGUST (T2 - please read below to understand about T2)


On 3RD AUGUST if you have settled the outstanding of RM 500, now your portfolio have a share value RM 2500 (lets say Bank recognise the share as full value). Bank will give you a buy limit of

RM 2500 (1 X share) , you can use the RM 2500 limit to buy another RM 2500 share again!

*CONTRA means, you buy and sell share by using your extra within the T2 period. Profit and losses will enter into your "contra gain or loss" in your outstanding summary


FOREIGN LIMIT

if you need to buy any foreign share at night, you will need to call your dealer, before 5pm of the day. if you plan to buy Hong Kong or Singapore share, you can just inform your dealer to open the limit during day time.


It doesn't need deposit foreign currency to get foreign limit, your RINGGIT in trust can be use to request limit for foreign. if you have bought foreign share, the foreign share will be AUTO to be your foreign limit, does not need to request again, unless you need more. Same goes to if you have foreign currency in that account, it can provide foreign limit with x2 .


After you sold the picked up foreign share, the foreign currency will be remain in Foreign currency in your trust account.


How to check limit


Below is website version, to click the page, just click on "Portfolio" at menu bar (between "TEMPLATE" and "ALERT")


I crop and highlight the part from limit & exposures. RM 24152 is the MAX BUYING LIMIT OF THE DAY. It is auto calculated based on your collateral, and it is not full limit, because there is around 20% limit allocated to your foreign limit, in case at night you wan to purchase US share.


2. Outstanding Summary

As you can see below, i have bought and sold share, which both is haven't offset from my trust (bought share) and sold share haven't deposit into my trust (explanation please look at 3. Settlement Cycle). Total i have available cash of RM 11882.74 and i am holding very little other share. RM 11882. 74 x 2 times = RM 23765.48 plus the little share at hand, it is around that figure.


if you are holding cash ONLY, then your limit is easily to calculate, if use share as collateral, then is another case. example if your share is call warrant, company warrant, PN17 or risky company share, the value either zero, or half or quarter. Value change time to time.




Trade With Your Limit Wisely

“leverage can help you accumulate your wealth faster, and bring you to hell even quicker.”

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