I still don't get why people think shorting is 'more risky'. There was a great thread on here about this that I can't find right now. Here's how I view it: On the ES, my typical stop is 1-1.5 pts, regardless of going long or shorting. How is that more risky if I am shorting? I am willing to risk 1 - 1.5 to make 2+, either direction. I would argue that when stocks/indexes drop, they drop HARD. When they go up, it's typically not nearly as quickly as when they fall. Think about it - when there is some bad news or bad econ reports, the e-mini's especially react quickly and when it's down, look out below. All those stops for the guys that only go long get taken out and then they watch from the sidelines. I just would not rule out shorting, or at least buying puts if going to trade stocks/options. Keep in mind like someone posted here - if planning to daytrade and have under $25k, trading stocks is not really an option. Another reason to consider futures - no daytrading account minimums or 'pattern daytrader' rules. Keep in mind though, a $5k account will not be able to withstand losses very well either. Again, that is why a $50k+ account is preferred and highly recommended.
Because you can potentially lose more money than you have in your account. Before that, you will probably get a margin call...either way, it'll be painful.
The main fundamental reason why people think shorting is more risky, is because a stock (example) has no limit to which the price may reach. This fundamental assumption is most cases is void because if the risk management plan you are using lets you get that far in trouble, that in turn is more risky than shorting -Kastro
Well now, 33, huh, and most everything has passed you by, by now. Yes, please jump. You are ready. Oh you are just so ready. Ready to die the financial death of all those financial corpses heaped up in front of you of the 95% of past traders who FAIL.
Cash - isn't that true for going long and then the position drops like a rock??? I only trade futures, so maybe there is something with stocks that I don't understand, but if I am long the ES at 1300 and it is at 1200, I got a problem. I think the 'book definition' may be that shorting has unlimited risk since the position can just climb forever and if you go long the most you can lose is if it goes to 0. HOWEVER, with proper risk management, the amount at actually at risk should be dictated by proper trade management. In my case, the amount at risk is the same - 1 to 1.5 pts on the ES whether going long or short and typically my short positions move much quicker than my long positions; therefore, I consider going long more risky.
Well stated Kastro! It turns out this past 52-week period, I've made more on shorting than by going long. I'm indifferent to direction as a simple trend follower but that's the ways it's worked out recently...
Don't take this the wrong way but - - the best thing that can happen to you is to lose, lose big so it hurts, blow up your account, then you will learn something about yourself. This will be lesson # 1 of your tuition of which you have paid the fee. Now being perhaps stubborn, and full of the memories of a handful of winners you will return with a refuelled account and begin the quest of the holy grail, gathering every indicator known to man... slowly u will realise that every indicator works sometimes.. and sometimes not.. If your lucky and you have learnt from lesson # 1 you may break even or very more likely end up on the downside , but you have learnt lesson # 2 : that money/risk managment actually got u here, congrats If you get to this stage. The Fee : Financial loss from two years out of regular employment, a void in your CV/resume where u could fill in "gambling". Stage 3 : (can u fund stage 3?), u will be in the top 5% now Carefully Risk managed positions on high probability entries. You will have ditched all the Indicaors at this point and be more alert to Price action. Result : Break Even to Net Positive. 3 years / 3 accounts at least, Its a lot to throw away. Are you really Sure you want to go down this road ?
"The Fee : Financial loss from two years out of regular employment, a void in your CV/resume where u could fill in "gambling"." i have to say you would have to be nuts to quit a well-paying job while you learn to be profitable... why do this to yourself? also, trading being your only source of income will probably make your journey to profitability slower because of the added pressure... learn while you work another job, imo... it makes SO MUCH MORE SENSE.