IMPROVEMENT OF STOCK TRADING PERFORMANCE USING ALEXANDER ELDER’S 3M TRADING PILLARS (CASE STUDY: TARBANTIN INVESTAMA)

• Main Author: Tampubolon, Doddi
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/58085
• Institution: Institut Teknologi Bandung

Equity, as one of the main of asset classes, has become the investment that gave best return in the history of financial market. Grossman and Stiglitz (1980) state that investor will trade when the marginal benefit of doing so is equal to or exceeds the marginal cost of the trade. The development of IT has made the barrier to entry the capital market become very low. On March 2021 the number of Single Investor Identification (SID) in Indonesia Stock Exchange (IDX) has been increased by 76% annually. However, there is no guarantee of success in the stock market. There are risks need to be managed and uncertainty in the market. Brad M. Barber and Terrance Odean (2011) published a research that investors lose money in the stock market, with many of them persisting in the face of repeated losses. Tarbantin Investama, an investment company, have allocated 10% of its capital in stock trading business. Using trading approach, trading business unit is established to earn profit during bullish market phase without need to suffered a deep loss when the market in bearish phase. Since its establishment, trading business unit has generated low return, which are 1,1% and 1,6% in 2019 and 2020 respectively. During the same period, Jakarta Composite Index (JCI), the representation of stock market in Indonesia recorded -2,4% and -5,1% declined performance. There are some occasions and incidents during there period. From domestic, the presidential election of Indonesia in 2019 and a mass movement which led to streak of riots have negatively impacted the market. From global, US-China relation was in tension because of trade war issue and affect the global market, including Indonesia. Geopolitical instability in Middle East and presidential election of US in 2020 have contributed the uncertainty of the market. In 2020, the Covid-19 outbreak shocked the world and impacted the global market, including Indonesia. This research aims to help Tarbantin Investama, particularly trading business unit to figure out the rootcause and to improve its performance. Using 3M Trading Pillars of Alexander Elder, this research analyze mind (psychology), money (risk) management and method (trading system) aspects on trading business unit of Tarbantin Investama. Interview with stock market practitioners in Indonesia and related research on US, China and Taiwan stock market provided to give a broader perspective. The rootcause is analyzed using fishbone diagram. After conducting analysis, found out the trading cost was very high and has swept 83,2% and 95,8% of the gross return in 2019 and 2020 period respectively. The noise of source information and inability to handle emotion has made trades become inefficient. Some of the trades were executed not as per trading plan. The risk was not managed properly and harm the equity during the deep decline of the market in the outbreak of Covid-19. A streak of small losses had erased the return. The setup of trading system has a weakness and had failed to control the risk. This research found a set of proposed improvement. Psychology trading have to be corrected and focus to internal development. Risk management applied to trading system to ensure the equity will not harm by a big loss from a single trade and/or a streak of small losses. How to treat and react on the news and information is need to be improved, and the development of independent research is proposed to be prioritized. Most of information provided in the stock market are the performance of mutual fund and institution. The author recommend reader to continue and elaborate future research on individual investor, particularly related to behavioral finance.