Short Selling Stocks.

[uptou]

Hello,obviously there is strong trending to the downside with alot of the worlds stock markets at the moment,& talk from experts that the bottom could be along way of yet,& others who say we could be in for a short rally.

If you look at the s&p 500 with a 9 week moving average,& adx its obviously indicating bearish for the intermediate.

But as i'm new to learning stock trading i'm interested to know what are the rules regarding short selling in the various worldwide stock exchanges (using internet brokers)?

I remember there being a ban on shorting financial companies for a little while in the uk/u.s,but not sure about the present?

There are obviously alot of poorly performing companies out there,but nobody seems to be talking about short selling.

Cheers all.

[Carmine6]

Honestly, the fact that you're new to trading and you want to short an index might be a bullish sign.

Shorting an index is pretty impossible unless you've got a lot of money and a lot of time. You have to short an index tracking ETF or something. So to short the S&P 500, you could short SPY. Those restrictions were lifted.

But be aware indices have an upward bias. They replace poor performers with good performers over time. For example they're looking at taking Citibank out of the Dow. They're not going to throw another broken company like that in there, they'll pick a company with better prospects.

Honestly, I'd say don't do it since you're unlikely to be willing to take losses if the indices pop. Long positions are easier to wait out. Shorts you have to take profits when you can. Yeah that's not true the last 2 years, but look at the last 50 years and there's very few years it is the case and it's usually a long time in between.

But I would have said the same last year and I'd have been wrong. So it is really uptou.

[soundman]

Yesterday's short list at the The Stock Exchange of Thailand.

[uptou]

Thanks for the replys.I never had any indexes in mind,but rather the companies that make up them,eg in the s&p 500,& i'm only interested with regards to using a demo account,& specifically swing trading.

I've recently been looking for large cap companies with good financial health,& decent earnings (for the present conditions) that are in clear trading ranges,as i'm wary of any short trend to the upside,& would hopefully buy or short the stock in its trading range,in the direction of the market,eg s&p 500.But

[dotcom]

SPX double short ETF = SDS

SPX Double Long ETF = SSO

Australia has a short selling ban on financial stocks right now.

Triple short SPX ETF = BGZ

Triple Long SPX ETF = BGU

To do shorting you would need a margin account & some experience trading. You can buy & sell these ETF all day long. Just like a stock.

[uptou]

Thanks for the replys.I never had any indexes in mind,but rather the companies that make up them,eg in the s&p 500,& i'm only interested with regards to using a demo account,& specifically swing trading (very short term,usually 3 days plus).

I've recently been looking for large cap companies with good financial health,& decent earnings (for the present conditions) & that are in clear trading ranges,as i'm wary of any trend to the upside as there doesnt seem to be any conviction,& hopefully buy or short the stock in a trading range,in the direction of the market,eg s&p 500.Its also hard to screen for stocks in trading ranges,as far as i know.But i'm not even sure looking for trading ranges is the right way to go in these conditions,i just know that you get more hits when trading,trading ranges than trends,& the profits are generally smaller.

I'd be very interested in finding out what is the best bottom up screen for looking to BUY stocks at the present time.The book i have suggests the following screen if growth stocks are in favour,with a market cap of 250 mil plus (>= above);

last closing share price >$5

ave daily volume (last 50 days) >100,000

eps growth (most recent quarter vs year ago quarter) >25%

annualised 5 year historical eps growth rate >10%

relative price strength rating>80

return on equity>18%

But obviously this suits a bull market rather than the current conditions.Obviously i know that you are not going to get many companies with 25% earnings growth at the moment,but that can be adjusted.

i'm drawn to just looking for companies that have good balance sheets,earnings,& are likely to do well as people budget more,or,& companies that wont be effected by the crisis,& are basically in trading ranges (going sideways).It just seems to me that relative price strength doesnt really mean much at the moment as theres not enough big money getting involved to push the stocks much higher?????

Ps.Any recomendation of a stock forum would be much appreciated.

cheers

[tjo o tjim]

I think things are moving more towards volatility rather than being pushed down much harder. Shorting is tricky, as is investing in volatility. It requires a lot of work and the risks do not always track the rewards. Right now is a good time to sit on the sidelines and look at companies that you think have strong prospects, and those that are going to have a hard time, and see if you come across a good entry point. Buy in stages...

[Naam]

Honestly, the fact that you're new to trading and you want to short an index might be a bullish sign.

Shorting an index is pretty impossible unless you've got a lot of money and a lot of time. You have to short an index tracking ETF or something. So to short the S&P 500, you could short SPY. Those restrictions were lifted.

you mean all these thousands of available put options for a long list of indices do not really exist?

[Carmine6]

Honestly, the fact that you're new to trading and you want to short an index might be a bullish sign.

Shorting an index is pretty impossible unless you've got a lot of money and a lot of time. You have to short an index tracking ETF or something. So to short the S&P 500, you could short SPY. Those restrictions were lifted.

you mean all these thousands of available put options for a long list of indices do not really exist?

Having an equivalent to a short position of an index is easy to do. Actually being short the index is entirely different. Even the ETF fund values vary from the index movements.

Maybe I'm overly precise but if I buy puts and someone asks me if I'm short, I say no I have puts. But yeah you're right, if I were short a S&P 500 ETF and you asked if I was short the S&P500, I would say yes.

[lannarebirth]

Honestly, the fact that you're new to trading and you want to short an index might be a bullish sign.

Shorting an index is pretty impossible unless you've got a lot of money and a lot of time. You have to short an index tracking ETF or something. So to short the S&P 500, you could short SPY. Those restrictions were lifted.

you mean all these thousands of available put options for a long list of indices do not really exist?

Not to mention shorting futures and options on futures.

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

[Naam]

Honestly, the fact that you're new to trading and you want to short an index might be a bullish sign.

Shorting an index is pretty impossible unless you've got a lot of money and a lot of time. You have to short an index tracking ETF or something. So to short the S&P 500, you could short SPY. Those restrictions were lifted.

you mean all these thousands of available put options for a long list of indices do not really exist?

Having an equivalent to a short position of an index is easy to do. Actually being short the index is entirely different. Even the ETF fund values vary from the index movements.

Maybe I'm overly precise but if I buy puts and someone asks me if I'm short, I say no I have puts. But yeah you're right, if I were short a S&P 500 ETF and you asked if I was short the S&P500, I would say yes.

i am not talking about any ETFs (which indeed might vary) but about clearcut options which (up and down) follow an index to the second decimal and that without any time delay because the computations are based solely on the points of the "underlying" index.

[Naam]

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

i'm with you LRB and would rather dare to take a flight to Macau, wait for the third of three Elliott waves to hit the lower resistance of a Bollinger Band when it aligns with the seventh Fibonacci house and then carefully decide whether to place my bet on red or perhaps black label.

p.s. now i'm heading for full cover as i expect you to use live ammunition

[lannarebirth]

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

i'm with you LRB and would rather dare to take a flight to Macau, wait for the third of three Elliott waves to hit the lower resistance of a Bollinger Band when it aligns with the seventh Fibonacci house and then carefully decide whether to place my bet on red or perhaps black label.

p.s. now i'm heading for full cover as i expect you to use live ammunition

Well you know Herr Doktor, all that stuff works really well (especially Fibonacci Numbers),.............. until it stops working. That's when you reach a little bit deeper into the bag for you Gann Square of Nine Chart, your Monte Carlo projections, and finally your rosary beads.

[Naam]

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

i'm with you LRB and would rather dare to take a flight to Macau, wait for the third of three Elliott waves to hit the lower resistance of a Bollinger Band when it aligns with the seventh Fibonacci house and then carefully decide whether to place my bet on red or perhaps black label.

p.s. now i'm heading for full cover as i expect you to use live ammunition

Well you know Herr Doktor, all that stuff works really well (especially Fibonacci Numbers),.............. until it stops working. That's when you reach a little bit deeper into the bag for you Gann Square of Nine Chart, your Monte Carlo projections, and finally your rosary beads.

i am well aware that it works LRB. the simple reason is that people believe in it and act accordingly... till they stop believing in it. people also believe that gold, diamonds, fiat money, works of art and you name it have certain values. these values do indeed exist as long as a certain environment prevails. if the environment changes those values can change to zero or turn into a liability within the blink of an eye. as simple as that.

there are a few things though which possess intrinsic value, e.g food, shelter, clothing and (up to a certain extent) pussy. seen from certain perspectives even shit has a tremendous intrinsic value because billions of flies since millions of years can't be wrong, can they?

[lannarebirth]

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

i'm with you LRB and would rather dare to take a flight to Macau, wait for the third of three Elliott waves to hit the lower resistance of a Bollinger Band when it aligns with the seventh Fibonacci house and then carefully decide whether to place my bet on red or perhaps black label.

p.s. now i'm heading for full cover as i expect you to use live ammunition

Well you know Herr Doktor, all that stuff works really well (especially Fibonacci Numbers),.............. until it stops working. That's when you reach a little bit deeper into the bag for you Gann Square of Nine Chart, your Monte Carlo projections, and finally your rosary beads.

i am well aware that it works LRB. the simple reason is that people believe in it and act accordingly... till they stop believing in it. people also believe that gold, diamonds, fiat money, works of art and you name it have certain values. these values do indeed exist as long as a certain environment prevails. if the environment changes those values can change to zero or turn into a liability within the blink of an eye. as simple as that.

there are a few things though which possess intrinsic value, e.g food, shelter, clothing and (up to a certain extent) pussy. seen from certain perspectives even shit has a tremendous intrinsic value because billions of flies since millions of years can't be wrong, can they?

Correct, but wrap your Klingon kranium around this:

In the Dow, Friday's low creates these Rates Of Change:

1. '87 low to '09 low +.61 pts/calendar day

2. '90 low to '09 low +.612 pts/calendar day

3. '00 top to '09 low -1.58 pts/calendar day

4. '32 low to '09 low +1.613 pts/week

[rethaired]

Not saying that short positions wouldn't pay off handsomely from these levels, but you'd need bigger cajones than I posess to be doing it.

i'm with you LRB and would rather dare to take a flight to Macau, wait for the third of three Elliott waves to hit the lower resistance of a Bollinger Band when it aligns with the seventh Fibonacci house and then carefully decide whether to place my bet on red or perhaps black label.

p.s. now i'm heading for full cover as i expect you to use live ammunition

Well you know Herr Doktor, all that stuff works really well (especially Fibonacci Numbers),.............. until it stops working. That's when you reach a little bit deeper into the bag for you Gann Square of Nine Chart, your Monte Carlo projections, and finally your rosary beads.

i am well aware that it works LRB. the simple reason is that people believe in it and act accordingly... till they stop believing in it. people also believe that gold, diamonds, fiat money, works of art and you name it have certain values. these values do indeed exist as long as a certain environment prevails. if the environment changes those values can change to zero or turn into a liability within the blink of an eye. as simple as that.

there are a few things though which possess intrinsic value, e.g food, shelter, clothing and (up to a certain extent) pussy. seen from certain perspectives even shit has a tremendous intrinsic value because billions of flies since millions of years can't be wrong, can they?

AHAHA! VERY FUNNY!

Speaking of sh*t and p*ssy (how scatological can one be?), thinking back at the economics courses I took in university (first and 2 year), these "commodities/services" were never mentioned as being part of the economy! Maybe this is reserved for higher level courses? (In other words, more BS and A hole over there! ), but I digress! I think these "goods/services" should be factored in! Ok! OK! The latter more than the former, but you get the drift, if you want that drift, of course !

Edited March 7, 2009 by rethaired

[Naam]

AHAHA! VERY FUNNY!

Speaking of sh*t and p*ssy (how scatological can one be?), thinking back at the economics courses I took in university (first and 2 year), these "commodities/services" were never mentioned as being part of the economy! Maybe this is reserved for higher level courses? (In other words, more BS and A hole over there! ), but I digress! I think these "goods/services" should be factored in! Ok! OK! The latter more than the former, but you get the drift, if you want that drift, of course !

if you have something to add to the discussed facts than do it. mentioning the economic courses you attended and their lack of information concerning real life does not add to the discussion.

[Naam]

Correct, but wrap your Klingon kranium around this:

In the Dow, Friday's low creates these Rates Of Change:

1. '87 low to '09 low +.61 pts/calendar day

2. '90 low to '09 low +.612 pts/calendar day

3. '00 top to '09 low -1.58 pts/calendar day

4. '32 low to '09 low +1.613 pts/week

nice try LRB but my Clingon cranium lacks those specific gray cells which are necessary to understand the scientific facts you posted. they (the cells) are of use only to comprehend rather easy subjects such as quantum mechanics, fluid dynamics, particle physics, et al (especially "Al"). so bear with me and explain as you would explain to a ten year old. are you talking now about a tsunami wave created by Mr. Elliott? hmmm... looks more like the secret formula devised by Signore Leonardo Fibonacci on a boring day to confuse the simple minds of Klingons. am i right?

[rethaired]

AHAHA! VERY FUNNY!

Speaking of sh*t and p*ssy (how scatological can one be?), thinking back at the economics courses I took in university (first and 2 year), these "commodities/services" were never mentioned as being part of the economy! Maybe this is reserved for higher level courses? (In other words, more BS and A hole over there! ), but I digress! I think these "goods/services" should be factored in! Ok! OK! The latter more than the former, but you get the drift, if you want that drift, of course !

if you have something to add to the discussed facts than do it. mentioning the economic courses you attended and their lack of information concerning real life does not add to the discussion.

Jeesh! A little bit of levity has not hurt anyone, has it?

I feel you have a bit of a ... short-temper! That's on-topic! Satisfied!

BTW, I was asking a peripheral question! I await the answer!

[iono]

If you're new to trading I suggest you go to this site askatrader.com, nothing to pay, not a real active board, but it is a place to begin learning, ask about the DTFI method, this is a basic method that will teach you a simplistic way to trade, wet your appetite if your interested in trading, nothing to pay.....but if you decide to go this route it will cost you to learn i.e. you just don't short a stock or index willy nilly and think you'll make money.....sure once or twice then you'll get greedy and lose your buttocks. Get ready for the emotional ride of your life, better have deep pockets as there are some painful lessons to learn about money management and your own emotions.

[lannarebirth]

Correct, but wrap your Klingon kranium around this:

In the Dow, Friday's low creates these Rates Of Change:

1. '87 low to '09 low +.61 pts/calendar day

2. '90 low to '09 low +.612 pts/calendar day

3. '00 top to '09 low -1.58 pts/calendar day

4. '32 low to '09 low +1.613 pts/week

nice try LRB but my Clingon cranium lacks those specific gray cells which are necessary to understand the scientific facts you posted. they (the cells) are of use only to comprehend rather easy subjects such as quantum mechanics, fluid dynamics, particle physics, et al (especially "Al"). so bear with me and explain as you would explain to a ten year old. are you talking now about a tsunami wave created by Mr. Elliott? hmmm... looks more like the secret formula devised by Signore Leonardo Fibonacci on a boring day to confuse the simple minds of Klingons. am i right?

That is the Golden Mean or Ratio. The basis by which all Fibonacci Numbers are related. Me, I like looking at the pictures, but you can crunch the numbers if you like :

[Nouf]

Selling short stocks or options is not as easy as it sounds, especially with options, as you need to understand the Greeks, and the terminology and how options works

its not a case of taking a put option on WXY stock and saying i think it will be this price by WXY date date, as you have to weigh up the cost of the option against the expected return, things like Delta and Theta have to come in to play

let alone Gamma and IV (Implied Volatility)

Any experinced option trader will be reading this and should already understand the Greeks, and already know this, others reading this are thinking <deleted>

Personally i find it easier to trades E-mini SPOO futures if you want to trade the actual S&P index, or an ETF such as the ones listed above, the double and triple inverses ETF`s can burn you if you make a mistake, like wise can yield good profits,

Selling short is Extremely dangerous, especially in this environment as when Shorts have to cover an explosion to the upside can be savage as many have witnessed the past 16 months likewise short for the long run has been the proftiable trade if you could of taking the viosuc swings in the market, but again Hindsight trading is alot easier than real trading

While its been the right rade for the past 16 months, but timing is crucial to your plan, get your entry wrong, you GET OUT, or smoked

This is while bear markets kill most traders as the vicious rallies kill many bears, and the declines kill the bulls,

small risk/high reward is what you are after

as a rumour from the government or some sort of merger can force a squeeze thats gets short sellers scrambling to cover at any price to get out of positions or lock in profits, so its a self fulfilling, as the the bigger the outstanding shorts postion on a market or stock the bigger and more vicious the rally can be

Believe me anyone thinks that there is no corruption or insider trading is not trading the same market i trade, Big players are there to maximize and hurt the small players, you only have to look at the stunts they pull near to Options Expiry Friday (3rd friday in the month) as a trader you really want to riding their coat tails

The bigger players move the markets, the smaller trader needs to follow the path of least resistance up/down

CNBC is Known for the Friday late 3.30pm rumour, Gasporino has hurt one to many short seller, with his BS rumour`s over the past 12 months

its only when the last of the buyers, (they can be real buyers or short sellers) stop buying then you have a delcine

markets can rally higher and drop lower than many think, thats why the market can rally higher on bad news, (i laugh at the fools that follow news)

the markets move up and down based on the simple concept of - For every buyer there is a seller

The market is a very simple concept, and it amazes me why so many get into trouble when it really consists of buying and selling, when the balance shifts to one side thats the direction, and vice versa

I also like paying against short sellers as the rapid short covering rallies yield the quickest profits and its straight up (like the last 30 mins on friday 20 handles straight up, that was short sellers covering before the weekend scared they dont want to be exposed by some government stick save that opens the ES 30 handles higher on Sunday)

In fact they are the better paying trades to get long, as the profits can come quickly, as you dont become involvded with the chop,

Today is a day traders game its run buy a few individuals

Todays trading, is just that, trading not a "buy & hold" , contrary to what you may think, its a bunch of large sized hedge funds whipping the market around

I wont bore the non techincal traders or readers on how the market "really" works, but suffice to say its all about Numbers

But in order to beleive that you would need to really understand the dynamics of trading,

So i can suggest to anyone thinking about Selling short stocks, is do your research and be prepared to get hurt, if you dont have danger money you cant afford to loose, stay well away

and leave this game to the others who have a fighting chance to make money, now is NOT the time to be experimenting playing on the short side

alot of money can be made on the long side, especially if you can twing that a forced short covering rally has been initiated

If the public now wants to get involded in selling short thats probaly a bullish sign, and usually marks a turnng point

History shows that the masses are usually on the wrong side at turning points,

hhhhmmm better start looking for some long plays i think

Short squeezes come from too many being on the right side for too long as more people pile in on the one side, its odds soon that a reversal will be near.

Like now, we have had decline for virtually 2 weeks flat, so odds favour a rally soon, only no one know when but many are looking to patterns and price for targets from when a potential reversal can happen, like i say the question is when??? , but all you can do is manage risk, against potential reward

dont put yourself in front of falling knives and dont throw yourself in front of a run away train either

Too many are on the right side at the moment, and sentiment is almost there for a turn in the markets, but if a short squeeze gets initiated then a vicious rally will likely occurr as the shorts get squeezed

Edited March 8, 2009 by Nouf

[Naam]

excellent contribution Nouf! slight objections from my side concerning "falling knives". once in a while i try to catch one and most of the times i am lucky. i am however not in stocks but in bonds as well as cash and my trading jacket is mothballed since quite some time.

[lannarebirth]

Everyone's expecting that big short covering rally. The only problem is, the most beat up stocks no one was allowed to short, and many have covered short positions already, awaiting that bounce to resistance that hasn't come, to get short again.

[longtom]

Thanks a lot Nouf for your contributions, also regarding gold, this is very valuable advice for novices like me.

[Nouf]

If the public now wants to get involded in selling short thats probaly a bullish sign, and usually marks a turnng point

History shows that the masses are usually on the wrong side at turning points,

hhhhmmm better start looking for some long plays i think

Short squeezes come from too many being on the right side for too long as more people pile in on the one side, its odds soon that a reversal will be near.

Like now, we have had decline for virtually 2 weeks flat, so odds favour a rally soon, only no one know when but many are looking to patterns and price for targets from when a potential reversal can happen, like i say the question is when??? , but all you can do is manage risk, against potential reward

Too many are on the right side at the moment, and sentiment is almost there for a turn in the markets, but if a short squeeze gets initiated then a vicious rally will likely occurr as the shorts get squeezed

Ha Ha right on Que, shhheeesssh almost straight up 87 points on the SPX, and no sign of a pullback, this is one squeeze, bears have some thinking to do

Have we started a new primary wave of buying??? or is this still a Bounce within the same Primary trend, or will any retrace from here be corrective as we mount a wave of buying for over the spring summer???

have we started a new trend???

Decision?? decisions??

[lannarebirth]

If the public now wants to get involded in selling short thats probaly a bullish sign, and usually marks a turnng point

History shows that the masses are usually on the wrong side at turning points,

hhhhmmm better start looking for some long plays i think

Short squeezes come from too many being on the right side for too long as more people pile in on the one side, its odds soon that a reversal will be near.

Like now, we have had decline for virtually 2 weeks flat, so odds favour a rally soon, only no one know when but many are looking to patterns and price for targets from when a potential reversal can happen, like i say the question is when??? , but all you can do is manage risk, against potential reward

Too many are on the right side at the moment, and sentiment is almost there for a turn in the markets, but if a short squeeze gets initiated then a vicious rally will likely occurr as the shorts get squeezed

Ha Ha right on Que, shhheeesssh almost straight up 87 points on the SPX, and no sign of a pullback, this is one squeeze, bears have some thinking to do

Have we started a new primary wave of buying??? or is this still a Bounce within the same Primary trend, or will any retrace from here be corrective as we mount a wave of buying for over the spring summer???

have we started a new trend???

Decision?? decisions??

Well, it was the 61.8% retracement of the 1982 lows and the ATH on the $SPX. That's worth a good bounce or a bottom of some kind.

[badge]

short selling provides liquidity, this allows markets to discover price smoothly without exacerbation. As recent short selling bans have proven in the west - short selling does not encourage price weakness.

personally Id welcome the reinstatement of the US up-tick rule; gives the charts a chance to reset