Contra Trading 101: How It Works and What Investors Should Know
For active traders, market opportunities can move quickly, and investors may not always have enough available funds at the right moment to enter a trade.
This is where contra trading comes in.
A contra account allows investors to buy shares first and settle payment later within the market settlement period (T+2). Investors may use their cash and/or eligible shares as collateral to receive additional trading limit.
Unlike a traditional cash-upfront account, contra trading gives investors the flexibility to:
- Buy shares first and sell them later by T+2, or
- Settle the outstanding amount and keep the shares for longer-term investment
How Does Contra Trading Works?
There are four (4) key concepts investors should understand:
For example, a selected stock with a 5X multiplier mean that RM1,000 in collateral value may provide up to RM5,000 in trading limit.
Why Some Traders Use Contra
Contra trading is commonly used by active or short-term traders who want greater flexibility and the ability to seize market opportunities without fully funding every trade upfront.
Some key features available under Rakuten Trade’s Contra Account include:
- Up to 5X trading limit on selected counters
- Flexibility to buy first and settle later within T+2
- Brokerage fees from as low as RM1, capped at RM100
- Day Trade Rebate benefits for eligible trades
Things Investors Should Know Before Using Contra
While contra trading offers additional flexibility, it can also amplify both gains and losses.
As contra positions must be sold or settled by T+2, investors should monitor their positions closely and ensure they understand the risks involved before trading.
Contra trading may be more suitable for investors who:
- Actively monitor the market
- Prefer short-term trading strategies
- Understand market volatility and risk management
As with any trading strategy, investors should only trade within their risk tolerance and financial means.
How to Activate Your Contra Account
Via Website
- Login to your Rakuten Trade account
- Go to Dashboard
- Click “Contra: Open Now”
Via iSpeed App
- Login to the app
- Go to “My Account”
- Select “Contra”
- Click “Open Account”
Watch our contra trading explainer video here!
Stay tuned for more content from our ongoing contra-edutainment series.
New to Rakuten Trade? Sign up today and enjoy welcome rewards, including AAPL shares when you activate, deposit and trade!
