Find new investment opportunities based on Market Sentiment Indicator. Manage watchlist risk with leading indicator of volatility See what influential analysts and investors are saying about stocks in your watchlist
Find new investment opportunities based on Market Sentiment Indicator. Manage watchlist risk with leading indicator of volatility See what influential analysts and investors are saying about stocks in your watchlist
Shai.GalShai Gal is a highly experienced financial journalist with expertise in the tech industry and dividend growth stocks. He has a strong track record of producing insightful content that helps investors make informed decisions. Shai is skilled in conducting in-depth research and analysis to identify trends and opportunities in the market.
In the stock market you can profit not only from price going up, but also from price going down. Here is everything that is important to know just before you click on a short order in your trading platform
When we believe that the price of a certain property is going to fall, and want to make a profit from it, we sell short. If the price of the property does go down, we will buy it back - and earn the difference between the selling price and the buying price
There is a procedure that takes place behind the scenes to allow short selling. When we sell paper short, we have to borrow the paper from an entity that holds it. Otherwise, we will create a quantity of shares that does not exist - which in practice is not possible. Therefore, before making a short sale, make sure that the paper can be borrowed.
As with any trading operation, here too, it is important to check what the costs are - and whether they affect the viability of this type of trading. Because unlike buying long, selling short has an additional cost, which is the loan fee. As mentioned, we need to borrow the paper from a third party, and for that question we will pay the loan fee. The amount of the loan fees varies depending on the supply and demand for that paper. For example, at the height of the period of declines in Tesla stock, the loan fees in annual terms jumped from levels of 1% to levels of 450%, due to the high demand for borrowing Tesla shares. Therefore, before we make a short sale, it is worth checking carefully the level of the borrowing cost.
There is another and simpler option for short selling - using short index tracking products. In other words, you can buy funds that behave the opposite of the reference index. For example, if we buy ProShares UltraPro Short QQQ ETF (SQQQ), when the index goes down we will profit, but when the index goes up - we will lose. The advantage of these products is their simplicity, which makes them particularly suitable for traders who are at the beginning of their journey, or for traders who wish to short an entire index, and not just Single property.
Finally, trading activity on the stock market always involves a certain level of risk - a parameter that is important to take into account. Unlike a long position, in a short sale the loss is unlimited, for the simple reason that the security can increase endlessly and therefore, if you chose to go short, you should use trigger orders - which will limit the amount of the loss.
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
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Disclaimer: Past performance, whether explicitly stated or inferred from historical testing of methodologies, does not serve as an assurance of future outcomes or achievements.
The displayed outcomes pertain to a strategy not historically accessible to investors and do not epitomize the returns achieved by any specific investor. The Readiness Indicators, Sentiment Indicators, and aggregate score derive from a model retrospectively applied to historical data. This model is founded on assumptions intrinsic to its construct, which may remain unverifiable and expose stakeholders to potential losses. Engaging in active trading may not be advisable for individuals possessing limited financial resources, restricted investment or trading acumen, or a conservative risk profile.
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Disclaimer:
The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained.
The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.
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