Short Trading

By Joseph C Lombardo

Short Trading - The 'Long' and 'Short' of Trading I wish that people would more readily know that you can make money in the markets despite whether the markets are moving up or down. You can take a traditional, common approach to trading, that being, buy low and sell high. BUT, you can also flip-flop that method of trading and sell high then buy low and make money the same way. Now, you are trading! The market moves up and you collect. The market moves down and you still collect.

Long Trades - Short Trades The doom and gloom of the economy has people worried especially those that actively trade. When I hear people talk about how badly it is performing, I tell them that a lot of people made tons of money on the downward slope it has been taking. They always respond, "yeh, cause now they can get in at a low price and make money on the ride back up". I try to tell them "no, they actually made money on the way down too". That's when I lose them in the conversation and the subject changes. So let me try to explain this concept.

Long Trading; Buy Low - Sell High The words "long" and "short" have nothing to do with a time frame when we are talking in this respect. A long position (also stated as 'going long' or 'long on stock xyz') simply means that you are in a trade that you entered into at a low point and want the price to go up to make money. Long means you bought low to sell high. A long position is the traditional way to trade. It is the way most people understand and it is also the way (the only way) most people think that you can trade or make money in the stock market. It is less risky than taking a short position due to the fact that the market has a natural propensity to move upwards.

Short Trading; Sell High - Buy Low Short positions mean just the opposite as a long position but you make money the same way. You enter the trade at what you think is the highest price in anticipation for a downward move. To enter the trade, rather than buying low and selling high like in a long position, you enter the trade with a 'sell'. Once the price has moved down to a place where you would like to take your profits, you then exit the position by placing a 'buy' order. The buy order takes you out of the trade. Besides the markets' propensity to move upwards, there is another pitfall to taking a short position. You see, when you trade with a long position and the market moves against you (it moves down), theoretically, it can only go down to zero. On the opposite hand, if you are in a short position and the market moves against you (it moves up), there is no 'zero' point. It can move against you to infinity - thus, you can lose all your money plus possibly even owe your broker. So be careful when taking short positions and understand it very well before attempting one.

Summary: Let's look at it again to summarize. Long = Buy low and sell high = make money Short = Sell high and buy low = make money

I am an Accountant by Education, Entrepreneur by Passion and a Guide by Philosophy. I have learned that all work and no play certainly makes for a bad day. You can find the things that interest you most at http://AhCHOOgle.com There is a forum there and content is up dated often. Come visit us at http://AhCHOOgle.com and stay a while.

Enjoy!

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