Stock Market Analysis - Learn to trade stocks online

Friday, July 27, 2012

Stocks to short

If you are trading in the stock market, you know that buying stocks is not the only way that you can make money. You can actually profit from short stocks during volatile period or shorting stocks that are overvalue. How does shorting stocks work?
Short stock work exactly like buying, except that it is more riskier than buying if you don't have a stop loss.
For example, when you buy a stock at $5 a share for $2,000. If the company go bankrupt, the most you can lose is the $2,000 that you invest. However, when you are short, you are betting on a stock to go down. If the stock go up, then you are losing money. Please be aware there is no limit on how high a stock can go. If you bought the same stock at $5, and if the stock goes to $10, then you lose the $2,000. However, if the stock goes to over $20 a share, you are now in debt. You lose $6,000 in total even though you invested only $2,000. That's why you need to have stop loss when you are shorting.
It is important that you cut your loss early before it is getting too late.
Stocks to short is a great site to get stock short ideas if you want to short stocks. 

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