Shorting Stocks Strategy
Shorting a stock is the accurate opposite of buying a stock. When you will short a stock you will hedging your bets that the stock will go down in price disparate when you buy a new stock and believe the price will go up. In uniformity to short a stock you must have a margin account with your brokerage resolute. In addition you also have to short individual stocks on an maturity tick but can short the Exchange Traded Funds ( ETF’s ) on a down tick. Thus as an capitalist you have more of an advantage shorting the ETF’s than individual stocks. Many investors always try and short a stock way to untimely as they believe that the stock price is way overestimated. However many times a stock that is overvalued in price may become matched more overvalued especially when the stock market is in an great upward move. The proper time to short a stock is after it has encountered its first strong downward initiative and bounced for a short period of time which sets the transaction for a second move to the downside. Lets look at a new and other example. NTES which mythical a huge move in 2003 eventually peaked in October of 2003 and then made its first strong downward thrust ( points A to B ). Notice how NTES then found support near its 200 Day EMA ( purple line ) and 50 % Retracement Identical next the $40 level. After finding support near the $40 level NTES then rallied on below normal volume but encountered resistance at its 100 Day EMA ( unripe pursuit ) and 38. 2 % Retracement Stable near $48 ( point C ). This permit the stage for a succour short opportunity as NTES began to stall out forthcoming the $48 level. In this example NTES could have been shorted around the $48 stable with a Stop Loss Order placed just greater the $50 calm just in case NTES broke to the upside instead. During the month of December NTES fell from $48 to $35 a share but did find post just above its 61. 8 % Retracement Level which was near $34 ( point D ). Thus investors could have covered their short positions at one of two prices with the first at the 200 Day EMA near $40 and the second to be the 61. 8 % Retracement around the $34. Thus I believe the best time to short a stock is to wait for it to bounce later it makes its first major thrust downward, after going through an abundant upward move, and then try and catch the second move downward. When you are looking for stocks to short make convinced they are exhibiting all three characteristics. 1. The stock has in process undergone one sound move downward nearest making a top. 2. The stock consequently finds support at a unconditional Fibonacci Retracement Continuous or Moving Average and rallies on poor volume. 3. The stock then stalls out near its 38. 2 %, 50 % or 61. 8 % Fibonacci Retracement Level or Moving Average after rallying..