Top of the mornin’ to ya, traders. It’s Bryce here…
If you’ve looked at an index lately, you know what’s going on. Green-to-red moves are the new normal.
You wake up hopeful and see that futures are green. So you get caffeinated, and just as you start tracking your favorite tickers, the indexes scream “psych!” And then they paint the town red again.
Traders who joined in on the crazy bull runs of 2020 and 2021 got used to going long on a stock … or 10 or 20 … and making a pretty penny
But maybe now you’re wondering … Is it time to short sell?
I’m not here to convince you of anything, but I do want to shed some light on what you’d be getting into if you did.
Let’s dive in…
The Long and the Short of Short Selling
Today, many newbies only have long skills. I’ll admit I’m very much a long-biased trader. But in a bear market, most longs get sent to the sidelines and the shorts come out to play.
Most veteran traders play both sides. Unless you set aside money to cover expenses through bear markets or have a source of income outside of trading (smart thinking!), you’ll need to adapt to falling markets with new strategies.
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The short game is no walk in the park though. Listen to Stephen Johnson and me talk about short selling on the SteadyTrade podcast. I seriously had an out-of-body experience trading SL Green Realty Corp (NYSE: SLG).
I was a total newb and hadn’t set a definite maximum risk level going into the trade. So when I saw it keep going up and up and up, I froze! Ugh, I still remember the pain.
If you plan to adopt this new strategy, make sure you know what you’re doing first! It sounds obvious, but when it comes to trading, it’s too easy to get excited and jump in before you know what you’re doing.
There are a lot of new terms for you to learn, like borrowing shares and buying to cover. And don’t forget that as a long-biased trader, short squeezes are not your friend! If you’re trading on margin, there’s almost no limit to how much you can lose.
Scared yet?
There are many successful short sellers in the game though. And just as there are many types of long trades, there are many types of short trades as well. Listen to veteran trader Michael Goode lay down the short-selling groundwork for newer traders.
Conclusion
Trying out a new strategy is a serious decision. Just like you shouldn’t chase stocks after a breakout, you shouldn’t chase market conditions either.
Make sure you’ve studied the differences between going long versus short over and over. Watch and learn from veteran traders who’ve experienced shorting in different market conditions.
This is a great time to learn the mechanics of a short strategy so you can be ready the next time markets go belly up.
After learning both sides, you may still prefer one over the other. After all, Tim Sykes started out as a short seller but trades mostly long these days.
Whether you stay long, go short, or trade both, it helps to have a solid platform to help you find your best trades with the most up-to-date news and more. The StocksToTrade Premier offer is the #1 way for you to test every feature the StocksToTrade platform has to offer. Don’t miss this opportunity to level up your trading every day!