HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
Exness information and reviews
Exness
86%

Taking Advantage on A Bearish Market


Shorting a stock has been popular and widely accepted investment strategy in past years. It had become increasingly globally known when Bill Ackman and David Einhorn, two of the most remarkable names in the investment industry, pulled off major bets against the biggest companies in the stock market, which triggered investors’ interest in short selling. 

Rising in Lows 


Shorting a stock, or commonly known as short-selling, is a technique of investors in which they sell the shares they do not own. A broker, or a third party, makes it possible by buying the stock and lending it to investors. The borrower will return the stock when its price falls down to profit from the difference in its original price or will have to buy the stock at a higher price at a loss if price goes up. 

Traders have found a great way to rise in lows by making extra money even from a falling market. By shorting a stock, they are able to speculate on stock prices or use it for the less risky hedging purposes. 

Speculation, meanwhile, entails higher risks given the short time frame of the trade because most speculators only hold their selling position in a span of weeks to few months. But when the company’s shares sustain its declining price, it adds more value to your portfolio. 

If shares prices go up after shorting a stock, investors may not worry as they can place a buying order and return the stock to the lender or the broker, closing the short position. 

Shorting a stock can also use to protect your investment portfolio through hedging. Normally, investors with long positions capitalize on short selling to protect their stocks. This less riskier strategy does not aim to gain any profit but only to safeguard other investments. 

Hedging is like investing in an insurance for your property, such as your car or house. You can utilize, for example, a derivative contract (like futures) in the stock index to pull off short positions in times of downward movement from your long position on blue chip stocks. 

Shorting a stock gives relief to investors in times of bearish market. While it allows traders to speculate or hedge, this activity also has its downsides and restrictions. For instance, you can lose more than 100% of your money if prices sustain an upward trend. Additionally, short selling is not possible if stock owners are not willing to lend.

#source


RELATED

How to stake Ethereum

Ethereum is switching into a proof-of-stake consensus to allow the network to achieve scalability. Ethereum staking is when people lock up Ether (ETH) for a given time...

How to Trade Stocks Online: A 5-step Process to Get You Started

Online stock trading can be confusing to the uninitiated, but newcomers looking to start their investment journey needn’t be put off. Here’s a 5-step guide to get you started...

The Relationship between Gold and the USD

If you have been reading our research articles, you must have seen that our analysts very often talk about the negative correlation between gold and the US dollar...

The Art of Trading Forex With Stop Loss (Or Without It)

One can't overstate the importance of mastering the art of stop loss placement when trading Forex or any other financial market for that matter. Stop loss is an...

Is Ripple a good investment and can you profit on XRP in 2020?

Cryptocurrency trading has become a big business and is extremely popular for people just entering into the trading space, as well as for major institutional traders...

Forex Trading With PAMM Managed Accounts

Ever since the currency exchange realm has opened up to individual investors, it is seen more and more in people's portfolios. However, for most individuals...

The Effective Use of Technical Indicators

Technical traders often compute and plot mathematical quantities based on market observables like price and volume in order to indicate the past or present state of the market...

Pair Trading: Features and Advantages

The functionality of modern trading platforms allows traders to implement almost any trading ideas. However, there are methods of money management that allow...

Unlock new trading horizons with OctaTrader

As e-brokerage moves towards customer-oriented, user-friendly solutions, we at Octa, a global broker founded in 2011, have introduced an enhanced version of our proprietary trading platform, OctaTrader. In this overview, we describe the main features of this multi-device application.

What are Expert Advisors?

Expert Advisors (EAs) are automated programs that run on the MetaTrader 4 (MT4) or MetaTrader 5 (MT5) trading platforms. They are algorithms that can be used...

What are defensive stocks and why you should consider them?

The market has fallen sharply this year, and investors have seen losses. Question: Can defensive stocks help hedge against risks? What are their advantages?

Trading based on fundamental analysis

Fundamental analysis has been used for decades by investors wanting to identify the factors that can have an impact on asset values. Such...

Designing Forex Trading Plans and Rules

Just about every consistently profitable...

Chainlink: Is It on Track for a Bull Rally?

If you have recently watched the crypto charts, you can see the growing popularity of many coins, including Chainlink (LINK). And while so many assets are on the bull run...

Bitcoin Trading - The Ultimate Guide

Bitcoin is a cryptocurrency and a new and unique financial vehicle, unlike anything the world has ever seen. It’s called a cryptocurrency because...

All You Need to Know About Trading in the Best UK Penny Stocks in 2021

Ford, JD Sports, and Monster Beverage were among the many well-known firms that once traded for less than 1 pound a share. Those who bought these businesses...

How To Analyze Cryptocurrency?

New investors are always advised to do ample research and “due diligence” when selecting which assets to invest in or trade. By using comprehensive analysis...

What do you need to know about options CFDs?

Unlike traditional options, which are contractual obligations giving the right to purchase or sell an asset at a future date, the options CFDs we offer are derivative...

A Guide to Trading Metals

Precious metals such as gold and silver have been recognised as valuable metals for a long time, but gold and silver are not the only ones out there for investors

Cryptocurrency Market: How to Choose the Best Platform

Do you have an interest in the cryptocurrency market? Do you want to start trading? Are you unsure of what cryptocurrency trading entails? Do you know how the market...

FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Just2Trade information and reviews
Just2Trade
76%
FXNovus information and reviews
FXNovus
75%
Riverquode information and reviews
Riverquode
75%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.