Its 2000 all over again

Discussion in 'Trading' started by myminitrading, Jul 20, 2006.

  1. OMG, you were serious.

    If I make 4 dollars a share on the downside or 4 dollars a share on the upside I still make THE EXACT SAME AMOUNT OF MONEY. Why are you bringing percentages into the picture? If I had 100,000 dollars in my account and made 5000 dollars shorting stocks, or I had 100,000 and made 5000 going long at the end of the day I still have a 5% gain. Are you on drugs or what?
     
    #21     Jul 20, 2006
  2. Grail - I have to agree with you here.

    That's fine, they do not like to short and won't. When the markets go down, as they always do, they can sit and watch their $ disappearing as we take it.
     
    #22     Jul 20, 2006
  3. Aok

    Aok

    Mymini.

    Sell YM. What's the problem?
     
    #23     Jul 20, 2006
  4. #24     Jul 20, 2006
  5. Let me say it another way. It takes a move of much larger magnitude on the short side to produce a $4/shr profit than it does on the long side, for the reasons I stated previously.

    I'll re-iterate:

    ---------
    As a SHORT position moves in your favor, your working capitalization in that position gets smaller.

    As a LONG position moves in your favor, your working capitalization in that position gets larger.
    ---------


    Try to think deeply on it before posting again rather than just spouting another knee-jerk response. I know it is hard.
     
    #25     Jul 20, 2006
  6. The only potential problem with shorting is that your broker can call back the stock and force you to buy it back if he no longer has shares to borrow. This has never happened to me yet though.
     
    #26     Jul 20, 2006
  7. LMAO again. Please stop, I can't take much more of this. I think your brain is having a reverse compounding effect.

    Let's put this so even you can understand it.

    There is a 50 dollar stock. You go long and buy it and set your stop at 48.00

    I short the same stock and set my stop at 52.00

    Yes, I am limited because my stock can only go down to zero, and theoretically yours can go up forever, but who cares? You're not related to stocktrader3 are you?

    You are talking about potential total gain, AND I AM TALKING ABOUT RISK. THERE IS NO DIFFERENCE IN RISK. 2 dollars is 2 dollars is 2 dollars is 2 dollars is 2 dollars.
     
    #27     Jul 20, 2006
  8. wow, I think I need a new board. ( actually I know I do) That is kindergarten quality intellectualism.
     
    #28     Jul 20, 2006
  9. DHOHHI

    DHOHHI

    It's funny because after the 1st profit milestone is achieved, where BOTH traders make 20% you apparently then PENALIZE the short trader and only allow him to play with $8K in round 2 while the long guy gets to invest $12K. The short made $2K just as the long did. So he can take his $2K profit with his original $10K stake and have the same $12K. So the long has 50% more capital at work in your scenario which is the difference between your 17% and 25% figures. You didn't major in stats did you?
     
    #29     Jul 20, 2006
  10. Here's why position capitalization matters when dealing with profit targets:

    ----------
    Trader 1:
    short 1000 TZOO @ $100
    1000 x $100 = $100,000 starting capitalization

    cover 1000 TZOO @ $10
    1000 x $10 = $10,000 ending capitalization

    VS.

    Trader 2:
    long 1000 TZOO @ $10
    1000 x $10 = $10,000 starting capitalization

    sell 1000 TZOO @ $100
    1000 x $100 = $100,000 ending capitalization
    ----------

    Both traders took $90/shr on 1000 shares out of the stock for the exact same profit. The difference is that the short trader took ten times the starting capital to make the same gain as the long trader.

    Which trader can achieve a higher return on portfolio capital? The long trader.
     
    #30     Jul 20, 2006