The Thai stock market bull, which ran without respite for a few years to hit a 19-year high last week, has lured many new retail investors, particularly mom-and-pop investors.
In January and February alone, 40,000 new stock trading accounts were opened by local retail investors, bringing the total to 850,000.
The number is deemed high considering the target of 100,000 new accounts for all of this year set by the Stock Exchange of Thailand.
Many mom-and-pop investors have eagerly jumped on the bandwagon to bet on stocks irrespective of their sector. Penny shares are their main targets as they can offer huge gains in a short period with a small investment.
"I could make a profit of 7,000 to 15,000 baht a day from investing in penny shares," said one retail investor who declined to be named.
The investor, 58, said he has used an investment budget of 1 million baht to select stocks from the most active list on a particular day and, most importantly, their prices must be less than 10 baht each.
He always locks in profit when the stock price reaches one or two tick sizes above the bought price. However, he is ready to cut losses by selling when the price is one tick size below the bought price.
Mom-and-pop investors have earned handsome profits from day trading, explaining why the trading volume of retail investors has surpassed that of investment professionals.
Retail investors now dominate the market with 63% of overall trading volume, up from 52% last year.
A disconcerting signal of the rampant speculation was about 60 stocks with price-to-earnings ratios above 40 times at the end of February.
However, day traders got burned by the stock market's free fall last week.
The SET index slid 7.46% in the biggest weekly fall since October 2008 after hitting a 19-year high at 1,601.34 on March 19. About 1.1 trillion baht of market capitalisation was gone in one week. The market closed on Friday at 1,478.97 points.
The pullback has prompted worries among investors that the bull market may be over.
"I lost 40,000 to 50,000 baht from selling two stocks in my portfolio," the investor said, referring to last week's nosedive.
However, he still holds three stocks whose market values have not plunged into losses and was optimistic that the market will soon rebound to its recent peak.
He said he entered the stock market last year after he was persuaded by friends. Low deposit rates offered by banks also influenced him to become a day trader.
Another market novice, aged 26, said she lost an unrealised profit of about 150,000 baht in last week's fall and she sold her portfolio last Thursday. However, she still realised a gain of 20,000 baht from her investment of 400,000 baht.
She jumped into the stock market in the middle of last year because she believed she could earn easy money from investment.
She admitted that she preferred buying penny stocks as they need a small amount of investment and can make a profit rapidly.
"I will start piling up stocks again when the market recovers," she said, adding that she learned from the market's slump last week that she should set a level when she should sell stocks to prevent any loss.
However, the bull market creates not only speculative investors but also value investors.
Mr B, a white-collar worker aged 24, said he started ploughing money into the stock market late last year.
Before making investment decisions, he always seeks information about companies. Construction stocks are his top picks as they will benefit from the government's 2-trillion-baht infrastructure projects.
He sold all his stocks to take profits early last week after he saw a sign of the market's retreat.
"The stock market was too expensive and the pullback had to happen one day," he said.
He will begin buying stocks again when prices of his selected stocks hit his targets.