Don't Make These Short Selling Mistakes

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Sometimes I’m sarcastic and people don’t always catch on — like in this tweet. So I decided to explain further to help you understand. As a newbie trader, short selling can be super risky. Here’s what you should know about this strategy before you short again...

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FULL DESCRIPTION

Today, I want to explain this super sarcastic tweet. Some people understood it, but a lot of people didn't.

It’s directed at a lot of short sellers who entered the market in the last year or two. Too many newbie traders just like to short anything that goes up. They think that all these penny stocks will crash. So, if the stock’s up a decent percent in the day, they think that most likely it'll go down the next day. And a lot of the time, they can be right.

But this is where short sellers can get too confident and comfortable. Remember, the market can ALWAYS humble you! I've been a short seller. I've been there.

The reason I strayed from shorting is because of the risk, and newbies don't always fully understand it. For those of you who don't know, shorting is when you bet on lower prices — you take a negative position.

Essentially, you want the stock to go down. And most penny stocks drop after spiking for a while. Here’s the problem: A lot of newbies don't understand how high a stock can go. And if you’re a short seller who wants the stock price to fall, you lose if it goes higher.

And if you’re not careful, you can lose A LOT.

Short sellers try to predict the top ... they try to bet on lower prices. But often times, they get squeezed. That's what a short squeeze is. So if you're a short seller getting squeezed while trying to exit your position, you have to buy to cover. That means you have to buy the stock.

So you don't know if someone’s buying the stock because they think the stock is going up, or if they're just buying to cover to get out of their short. Either way, it creates more buyers, and that crushes the shorts.

Always, respect rule number one — cut losses quickly. If you follow this rule, you shouldn’t have big losses. Obviously, you can't be 100% perfect … It's not completely foolproof. But that mentality can help you learn to greatly minimize your risks.

What’s your approach to minimizing your risk while short selling? How has the market humbled you? Drop a comment below and let me know!


#TimothySykes #Pennystocks #Investing

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Hey, it’s Tim Sykes, millionaire mentor and trader. Thank you for watching my videos. I hope that they help you. I want to share everything that I've learned over the years. You can check out more videos right over there, and also click ‘subscribe’ so that you can watch all of these videos, get that knowledge and become my next millionaire student.*

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