You have probably heard the phrase; "The Trend is Your Friend" or "Don't Fight the Trend." When stocks are trending higher, the decision to buy stocks seems obvious, but what about when the market trend is clearly going down? Can we make money on a stock that we believe is going lower? As most of our readers know, the answer is "yes, by short selling stock." In recent months, there have been more profits made by short selling stocks than by buying stocks long. In this discussion we'll review the underlying concepts of short selling.
| |||
|
Short Selling Stocks
Typically, traders buy stock long hoping that it will go up in value.
Shorters, on the other hand, sell stock they DON'T own hoping that
the stock will drop and give them a chance to buy the stock at a
lower price to "cover" their previous short sale. In order to sell shares
that you don't own, you must borrow them from your broker, sell
them and then replace the shares by purchasing them at some point
in the future; hopefully at a lower price. If you sell short and
then the stock price is higher when you decide to purchase the shares,
you lose. Technically, the risk, or potential loss, from
selling stocks short is unlimited because
the stock price has the potential to go up forever.
There are a few things to note when selling short ...
** To obtain access to the entire article on Short Selling Stocks, in addition to a host of other trading and investing topics AND a list of stocks to short please register with us and Become a RightLiner Now!
Education too expensive? Try Ignorance™ Intelligent Trading is your key to greater profits. Let us show you how to sell shares short profitably - register to receive six issues of the RightLine Report FREE. There's no obligation and we don't ask for a credit card. You have everything to gain and nothing to lose.
