Introduction to Stock

Company in Indonesia divided into closed (perusahaan tertutup) and open company (perusahaan terbuka). Perusahaan tertutup or limited company would have its name PT in front of the company name, while perushaan terbuka or public limited company should start its name with PT and ended with tbk (terbuka). Limited companies always perceive smaller than public, hence if they require bigger funds, it possible to convert the company into public company. Being public company, a company must sell it shares to public or anybody. There are some advantages and disadvantage becoming public company. Some advantages are easy to raise capital. Public can sell its share of ownership to anybody in term of Initial Public Offering (IPO) through Indonesia Stock Exchange (IDX). The proceeds of cash receive would enable the company for acquisition, settlement of debts and research and development. However, the disadvantage is the company expose to take over. Takeover through purchasing by another company will make a company lose control or no control over their company, its true if another acquires 51% of a company.

Nowadays investing in stock is widespread among community in Indonesia. Investing in stock has been made easy by the availability of stockbrokers firm or investing company. The company is acts as an agent who is the intermediaries between sellers and buyers. Briefly, stock is “the portion of ownership of a corporation” (Moffatt M, 2008). Meaning if a person holds a stock, he/she will be a part of the owner of the company.

All stocks in Indonesia were traded in Indonesia Stock Exchange (IDX). Shares listed on IDX will have their own unique name in four capital letters such as BUMI, BBCA, and so on. The process is that investors bought stock through investing companies which they do transactions in IDX. Currently there are more than a hundred numbers of companies listed in IDX. Purchasing number of stocks should be in lot, which 1 lot is 500 numbers of shares. Shares movement is by second and prices might change in second with usually mention in highest price, lowest price or unchanged. Closing price will be opening price for following day. Movement of stock within the range set by regulator in IDX usually is 30% above or below limit.

Stocks can be categorized into different sectors of company activities and also category based on IDX category. Category by sectors could be companies activities in mining such as BUMI, ANTM and so forth; plantation such as AALI, UNSP

Trading stock requires skills and understanding the movement of stocks because the important thing is to know when to buy or sell. One of the way or tool useful for trading stock is called stochastic oscillators. It was used in technical analysis which indicates the closing prices should close at the same as current trends (Murphy C & Langager C., 2008). The chart was drawn within the line of 0 to 100. It also divided into two lines; upper line which describes the stock was in overvalued trading. It plotted straight line at 80 point, and if a stock line touched or crossed over the 80 mean there is a signal to sell or the stock is overbought. Another line represented at 20 point straight line. This point indicate the stock price is undervalued or oversold when it touched the line 20 or below.

Within this research, the use of stochastic will help to analyze all stock that listed in Indonesia. The application of this chart will determine whether this tool is a good indicator for analysis of stock in Indonesia. If the result show many of Indonesian shares could apply this method would indicate this tool should be considered for investors.