Is it worth it to be short on stocks?

For most investors, buying and holding shares is extremely logical.

When you buy, you bet on the success of the company. You hope that the price will go higher than yesterday and then will sell your stake in the company to profit.

What is less intuitive is the practice of short selling, or betting against a specific stock or security. While the concept may seem simple at first glance, the actual work behind it are much more complicated for investor entry-level to understand.

IS SHORT SELLING STOCKS WORTH IT?

Our thoughts? Short selling is a tactic used by intermediate to advanced traders, and it should only be attempted by someone who understands the mechanics and risks behind it. Under those circumstances, it can be a useful way to hedge or to profit in a down market.

Profitable:

Yoу мake money on an asset that you do not possess.

Risky:
In Short the possibility of profit is limited, but unfortunately the risk is unlimited. So you should know what you're doing before you try this method.

Research the company:
Read all documents, articles and company news.

How to make money from shorts on stocks?

Step 1: Find the share that you think will fall in the future and can be bought back at a lower price.
Step 2: Open a margin account with a broker to pick up shares.
Step 3: Sell the shares of the current market price. Collect receipts account.
Step 4: Wait for the price to fall.
Step 5: Buy the shares at the lower price.
Step 6: Collect the profits that are the difference from the moment you have shorted the stock and the moment in which you bought it.

Risks:

Losses may continue to rise. The maximum profit is up to 100 percent - but if the price is constantly increasing losses can accumulate beyond that.

Additional costs. Short sales have a different set of costs than a simple purchase. These include interest margin, costs of borrowing shares and dividends.

Short-term press and other events. Stocks with high demand for short positions may have a "short squeeze" - an event which forces sellers to close short positions. This could add further upward pressure on the stock.

Timing is crucial. Over time, markets have moved up. Even if your short game is good idea market may continue to bear raid somewhere in between.

So why sell?

Profit of a bear market. If you do not sell, you can not make money from falling markets.

To hedge the risk of a long position.

You are good at finding companies that something is wrong with and you think this will cause the price to drop.

Read more:

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• A story of a trader: ‘Trading can take over your life – but only if you let it’
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• The smartest way to invest your first $1000
• Should S&P500 be afraid from Friday 13th what the statistics look like