If the market is trading at the same value as it was two weeks ago, you will lose money and if you think the market is falling you will be happy with a return above your starting bid and ask/ask spread.
The key is to choose a period of three months or less to trade. That’s the time range that will be most profitable. You need not pay for protection when you short and also avoid buying or selling your own position in an attempt to get what you are looking for when your market is trading at a higher price. For more information about the rules and why you should hold the position in each trading period visit the short form book page.
You have also got to be careful when you shorting other positions, because we have a special page at the short form book where we cover each and every aspect of shorting in details and some important tips on how to be prepared when and where you short.
It is vital you understand the key trading elements of a trade – the timing.
What is timing in this context?
Timing can be defined as the amount of time for different events to occur.
If you are shorting shares of a stock – timing can be divided into, when it is closed (close of trading), when it goes to market (open of trade), when the market makes a new move (open of trade), when it stops making a move (close of trade), when it begins it new move (close of trading) and when it stops it.
Let’s take an example from the short form book book and let’s say the trading price is $40 and as it is closing to open price (a trade we would normally take on a profit – a ‘short sale’ in the lingo) you sell shares and then buy them back before the stock becomes the high or low that we would take to trade it.
You could trade them immediately, but doing so would you risk losing money at the higher price given the possibility that it can trade at $50 or higher before market close and then when the stock goes down. It also makes it more difficult to trade.
We will cover this more in detail in the short form book section of this page. For now, just get over it and know what timing means. Remember that if the market closes at the time and you close the position your profit and loss is exactly the same.
Where are the short form book pages written?
We use the following templates