Hong Kong is a world-class financial centre, with locals familiar with stock trading, property trading and other financial activities.
The government had implemented many favourable policies to support the development of the financial industry after 1997, especially after 2008 when Hong Kong suffered greatly from the global financial crisis.
Stock trading in Hong Kong is very similar to mainland China, except that there are no shorting or “put” options available for stocks listed on the Hong Kong exchange (HKEx).
This guide will introduce how you can survive stock trading by using your existing knowledge of Chinese stock markets.
You may choose an online broker based on their commission fees and user experience. There are plenty of them out there.
What to do?
Check what stocks are doing well/badly by reading the news. Familiar sources are RTHK, HKExNews, Yahoo Hong Kong Finance etc…
Make sure you get your information from reliable sources since there are a lot of stock market rumour mills out there. Read more here.
If possible, try to anticipate where the market will be heading by reading up on financial events that may affect share price in the future. It includes IPO/New Shares issuance announcement dates for listed companies, new large shareholders’ lists published by major companies after their annual general meetings (AGMs), etc.
Open an account
It may be a good idea to open an account with multiple brokers if you frequently trade so that you can get more competitive prices when placing orders.
Place orders
Place orders once you have prepared all the information and the price you want to buy is reached. Since there are no shorting options for HKEx listed stocks, your only choices would be “buy on open” (BOO) or “limit order”.
BOO means that if the stock price had not met your asking price on opening day, you’d automatically get it at that higher price when it reaches there later in the trading session.
If your asking price is not available even after days or weeks, try setting a lower one and hope for better luck next time (this may increase your chance of getting it since sellers will always ask for higher prices).
Either way, you choose, make sure you know what you’re doing to avoid overpaying.
Buy stock
To buy a stock, you have to place an order to state your asking price and your buying quantity.
For instance, you would type “BUY 338 HK$” when you buy three lots of ABC company at HK$300 each.
The problem with BOO orders is that there’s no guarantee how much you’d end up paying for the stocks, even though they may be worth less than what you are prepared to pay.
Therefore, it’s always better to set your asking price lower than the current market price so that you would only buy it when there is a lull in demand and the stock has reached your asking price; we’ll discuss how to do this in a minute.
Limit Orders
The same applies when setting “limit orders’ ‘ too, except that once the stocks reach your specific stop loss level (for instance, HK$270 for ABC company above), you will automatically get 100 shares instead of 3 lots.
Stop-loss
When setting a “stop-loss”, the threshold is calculated by taking away half of the current share price from 300 instead of subtracting it from 300 directly.
Setting up a Stop-loss
So, how do I set a stop loss then? Here are the guidelines
1) Set it between 5%~10%, depending on your risk tolerance and total portfolio size. [In this case, we set 10%]
2) Make sure that it has been at least 30 minutes since you bought the stock.
3) Don’t set a stop loss just before a high volume day, when it closes near the daily low or if you have a considerable loss. This is because if the stock keeps dropping in price after 30 minutes or before closing hour, your stop-loss order might become unprofitable and thus will need to be pulled out.
4) If you can’t stand not knowing what would happen, cancel your order around 5 minutes before closing time so that at least you won’t get stuck with 100 shares of ABC by accident if it continues to drop without stopping for an hour after trading hours.
