short selling http://www.bizcovering.com/tags/short selling New posts about short selling Short Selling: Is It for You? http://www.bizcovering.com/Investing/Short-Selling-Is-It-for-You.324443 Short selling is one of the strategies traders in stock employs when the market is showing a bearish trend. Short sellers are trying to take benefit from a falling price of shares by selling them at the prevailing rate and buying later before the trade ends at a lower rate. A bearish market is most suitable for this type of activity. As the name short selling indicates, this type of reverse trading is purely speculative in that selling is done on a stock a person never holds.

It is based on optimism for a bearish trend immediately after you purchase a stock. Only seasoned traders should try short selling. Even for them, short selling is sometimes can lead to a panic situation. For a short seller there are some precautions to be taken in order to reduce the loss in the event of price going up. For this he can place a pending order for buying at a higher rate by setting a trigger price. This is commonly known as placing a stop loss. If you have setup a stop loss for a particular stock, the system will automatically purchase the stock when the price touches the trigger price.

Short selling is for those people who knows the share market in and out and who like to take more risks. The larger the risk, the more will be the chance for more profit or more loss. If you are a new player in the stock market, never try this as it can land you in trouble, because you are selling something you don't owe. If the price goes up then you have to face the consequences. Either you should buy the share at a higher price booking heavy loss depending the sell-buy price difference or if you can’t buy you have to pay hefty penalty.

]]> Sat, 01 Nov 2008 09:40:55 PST How to Make Money in a Bear Market: the Basics http://www.bizcovering.com/Investing/How-to-Make-Money-in-a-Bear-Market--the-Basics.37830 Yes, it is possible to profit from declines in the stock market. One way to do this is to short sell a stock or a stock market index.

Short Selling

Short selling means that you sell stock before you buy it. You do this by entering into a short sale with your brokerage which then borrows this stock from another client who holds it in their account with the firm. This stock is then sold on the stock exchange at current market prices.

How to Profit from Short Selling

The best time to sell a stock or a stock index short is during a bear market. A downward trend in a stock or a stock index is a good indication of a bear market. Find a stock or an index that is declining with a sharp down trend. This would make a good candidate for a short sale.

Lock in your Profits by Buying the Stock

Once the stock or stock index has declined to meet your profit objective, you can lock in your profits by buying the stock or stock index. This will close out your position by returning the borrowed stock back to the brokerage.

]]> Sun, 05 Aug 2007 12:15:59 PST How to Find Out When to Short a Stock? http://www.bizcovering.com/Investing/How-to-Find-Out-When-to-Short-a-Stock.27147 If done properly there is a lot of money to be made by short selling stocks. Short selling is considered unethical by some investors as it is contrary to traditional investing. But it shares similar principles as done for long term investing.

Short selling means selling stocks which you currently do not own. This can be done if you are registered with your broker to do margin trading. Having certain balance in the trading account allows you to sell some shares which are not in your account. You will buy the shares after the shares have come down. It is similar to buying initially and selling later. To make profits we need to make sure that we buy at low price and sell at high price.

There are several reasons why a stock can fall. Knowing that and confirming the downtrend will help short a stock at appropriate time and make profit. The following paragraphs will let you know the different reasons for a stock?s fall.

When a stock is in down trend for quite some time, the long term investors will try to give support by buying at the 200 or 150 day moving average values. If that support is not observed and the stock falls below the 200 day moving average, then it is highly probable that the stock is in its long term downtrend and can go down further for quite some time.

Just before quarter results are announced there exits a chance to short sell a stock. When it is little bit clear that the company?s performance might not be as good as the previous quarter then many investors slowly start selling the stocks. After company announces the results, stock analysts will take some time to give their analysis. It is during this time that if the results are not better than previous quarter results, the short selling can be done. After analysts? announcement, depending upon positive or negative, one can decide to buy the stocks immediately or later.

At the year end many investors sell stocks which are in downtrend for quite some time to book losses. This will help them to get some tax rebate.

When insiders are selling stocks it could be due to their personal reasons. But many insiders start selling means that something is wrong with the company and we can short sell its stock.

If the company?s fundamentals are degrading day by day, it means that it will lose over long term. If the company is increasing inventory without increase in demand of its products, it is definitely going to face problems. It might sell its products at cheaper rates and this will lead to losses. If an industrial sector is fundamentally weak, then many stocks in that sector are going to be hit hard. Those companies which do not have a long term plan will lose more.

All these things can help find the appropriate time to short a stock. Always remember the basic principle of investing: buy low and sell high. No matter which is earlier.

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