Home > The Stock Market > PLAYING TODAY’S STOCK MARKET TIP #2: AVOID THE TRICKY SIDE OF SHORTING!

PLAYING TODAY’S STOCK MARKET TIP #2: AVOID THE TRICKY SIDE OF SHORTING!

October 22nd, 2011

Avoid The Tricky Side Of Shorting: The short side of the market is not the inverse of the long side. It is usually a quicker, steeper, and bumpier ride, which punishes investors for the slightest miscalculations in timing.

This is especially true when traders finds themselves “squeezed” in heavy short positions during violent stock market rallies. Beware of the reassurances of some investment advisors who claim that shorting the stock market can be a sensible way to invest your money. What’s not mentioned by such advisors is that successful short-selling requires more awareness, discipline, and experience than traditional trading on the long side. For the majority of non-professional investors, it’s wiser and safer to be on the sidelines planning your next move to the upside than it is to be emotionally involved trading the short side of the market. (Note: The act of “shorting” or to “go short” means to bet that a particular stock is going to go down in price instead of up.)

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“Few traders have found the short side profitable over a long period of time. I think that more than 75 per cent of my own losses have resulted from short sales.”

Robert Rhea ~ Author of The Dow Theory (1932)

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