guys, shorting a stock and long a stock is technically almost the same. As a stock approaches zero, it's impact on your capital gets smaller, hence you can keep shorting more until it reaches zero. with long, when it keeps going up, you can't keep adding to your position without spending any money. when all is said and done, you spend an equal amount of effort (almost). RECAP: Again, if you short a stock at $100, and it goes to $50, you can keep adding more or double your short position without adding cash to your account since the required capital to buy it back is much less, hence freeing up capital/cash. The only difference is, you have to take action. You don't just sit there with your $100/share short and wait til it get to zero. You add to your short position as it gets cheaper but you don't need extra capital. Again, A long position, you can't add to it without having to spend money on your account. oi vei.
Exactly. Its unbalanced looney stuff to claim that shorting is riskier that going long. All a successful trader is doing, particularly intraday, is playing the moves both up and down.
Wow... I didn't know shorting could be so difficult and hard. Maybe I should stop shorting and just sit here and wait for the next bull market. Fickle here's a question - would you agree that markets typically fall much faster than they rise? I would say yes; therefore, shorting provides more opportunities to make money quicker. So, while your scenario assumes identical moves, I would say that the short actually has a much better chance of reaching the profit targets quicker and thereby increasing capital quicker to place more trades. If you don't believe that, watch the indexes on down days and compare the movement to up days. YES, there are times when it just shoots up, but a good part of the time the up moves take all day and sometimes net out for a couple points; whereas the drops can literally happen in 30 minutes.
Sorry but fickletrader is right. Reverse compounding makes the game assymetrical with respect to volatility related risk managment AND portfolio rebalancing requirements.