As I’m currently busy editing (not writing) a book on investing psychology, it’s a short and sweet update from me today.
I’ve found myself entering more short trades recently than I used to. Not because I’m particularly bearish at the moment, but because I’m testing a new short trading “theory”. I won’t tell you just yet what my theory is, but I will tell you that I have found myself more likely to guarantee the stop orders on these short trades than on my long trades.
One reason is that when “going long” on a stock priced at (for example) 100p-per-share, the most I can lose per £1-per-point bet if it suddenly goes against me is £100; whereas the most I can lose on a short bet on the same stock is… potentially infinite. Another reason is that I like to trail my “guaranteed” stop orders more aggressively than non-guaranteed ones, and this is more effective on short trades because financial instruments usually fall faster than they rise.
Disclaimer: this posting is for general education only; it is not trading advice.