Your source for overpriced stocks

1. The market has an upside bias.

2. By selling short you are betting against market trends.

3. Buy and hold strategies are easier than short selling.

4. Good people do not take advantage from another’s bad performance.

5. Selling short deteriorates stock prices and market conditions.

6. Selling short is a backward process that involves confusion and mistakes.

7. Short trades involve unlimited risk.

8. When you are short, market makers can "squeeze" you easily.

9. The uptick rule may delay or prevent your entry and decrease your profits.

10. The uptick rule may cause a large "slippage" in your entry price.

1.   The market has an upside bias.

This is true only for market indexes over the long term, but traders work short term.

Markets can exhibit protracted downtrends during secular bearish periods. 

Even bull markets move down at least one third of the time.

Market indexes are frequently tweaked to trim low-performance stocks and overweigh high-performance stocks, thus creating a false impression that overall markets are healthy.

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2.   Selling short you are betting against market trends.

Selling short maximize traders’ potential for making money in bear markets and during the normal retracements experienced in bull markets.

We trade individual stocks, not markets.  Most individual stocks follow cycles, and those cycles offer a good trading opportunity, even during the declining phases.

At any given time, lots of companies fall from outrageously overvalued conditions while market indexes never reflect those failures.

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3.   Buy and hold strategies are easier than short selling.

Winning companies are scarce, true long-term growth stocks represent a dramatic minority.

Uptrends don’t last forever.  Some downtrends do:  Bussiness failure, continued losses, stock dilution and bankruptcy are not uncommon.

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4.   Good people do not take advantage from another’s bad performance.

Trading is not charity work.  Besides, selling short is not necessarily betting for failure but helping overpriced stocks to reach a fair valuation.

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5.   Selling short deteriorates share price and market conditions.

When you sell short, you add liquidity to the stock you are trading, improving market efficiency.

By ultimately covering your short position, you contribute to increased demand and price stabilization.

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6.   Selling short is a backward process that involves confusion and mistakes.

Paper trading helps to become used to selling first and buying second.

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7.   Short trades involve unlimited risk.

Theoretically, it is possible to lose more than your initial investment, however, almost every trader knows that losses can be limited by using stop orders.

By setting your stops before you trade, and adhering to them to exit your losing positions, your risk is always kept at the level you decide.

When you are new to selling short, trading small lot sizes minimizes the risk while assuring a positive learning experience.

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8.   When you are short, market makers can "squeeze" you easily.

Short squeezes result from high short ratios, small floats and low-volume trading.  By avoiding those conditions, you can minimize the risk of being squeezed.

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9.   The uptick rule may delay or prevent your entry and decrease your profits.

A Nasdaq uptick is considered in place when the inside bid is raised by a cent.  You can create your own uptick by entering your order at that price.

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10.   The uptick rule may cause a large "slippage" in your entry price.

By issuing limit orders, instead of market orders, to sell short, your order can only be filled at the price you specify, or a better price.  It may, or may not, be filled, but slippage won’t occur.

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