Discover Short Selling : A Quick Primer for Novice Social Traders!
Do you know that social trading can let you profit even from a declining stock? Yes, it’s not a joke. A bear market can be a blessing for you as investors have been making money through declining stock prices by short selling. And now, thanks to trading social networks, you can too. One of the advantages of social trading is that you can receive financial information from all across the world in real time. You can follow the activity of prominent investors and emulate it for optimal results. And what you can also do is observe when they short sell and generate a profit through declining stocks as well.
But wait a minute. What is short selling exactly?
Short selling explained
When you short sell, you’re selling an asset or instrument that you do not own. It is commonly done by borrowing the asset or instrument in question, selling it, and buying it back for a profit.
In order to make the profit, you need to buy back the asset or the instrument at a cheaper price than your original selling price. This is why investors look for stocks that are certain to decline and wait for it to happen so that they can short sell for a profit.
It’s also possible to short sell in Forex trading networks. The primary difference, here, is that you’re betting on the value of a currency to fall, instead of stocks. Going short in Forex trading usually involves currency pairs with long position in one currency and short position in another.
The risks and rewards
Although short selling is one of the tried and tested means of making a profit out of declining stocks, you need to understand some of its intricacies in order to minimize the risks and maximize the rewards. A majority of investors end up losing their assets because they want to short sell but don’t understand it.
Through social trading, you can follow some of the expert investors who specialize in short selling and learn from their example.
Keeping track of market trends
One of the things that’s extremely important when it comes to short selling is that not only do you need to keep track of the daily ups and downs, but you should also have the ability to predict future trends for specific stocks.
On the whole, stock markets are on the rise two thirds of the time, while the other third is the decline. You need to know exactly which stock to bet on and at what time.
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