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Re: Coyotte

SHORT TRADING :

Below is where the ASX approved

http://www.asx.com.au/investor/education/basics/short_sales.htm

go to the r/h side of the page -- midway down -- >download(TXT 15 kb)

The Risk/ Reward Ratio of Short trading is far too against the trader compared to the R/R Ratio of Long trading --- your potential Risk on a Short is unlimited whilst the potential Reward is restriced , worst of all if the stock was suspended or went into liquidation, etc --- your stuck with a Stock that you have contracted to BUY .

On the other hand a Long Trade your potential Risk is retricted to the inital purchace price , whilst the potential Reward is unlimited .

I mainly use shorts as a HEDGE ie: I have 1/3 of my INVESTMENT PORTFOLIO in ETF GOLD , when the price of Gold futures breaches in the UPPER TREND LINE of its trading CHANNEL , I take out a 1:3 Short on LHG , this saves me selling the physical , whilst the Short covers any losses ( break even ) , when the futures start to rebound , I buy back LHG , but at double the amount af shares that the short was , so if things go right you end up making a profit .

You can apply the same HEDGE principle to Shares :

If you had a Long postion in OSH and crude futures are topping out you could either take out a Short on OSH or a Long on say QAN .

If using the same share , I set the Long Price at the STOP , then as long as I can SHORT the stock above the STOP , I'm in break even situation untill , price verifys the next move.

I only do a NAKED SHORT TRADE on stocks like LHG, OXR etc because I have followed and traded LHG for over 5yrs , OXR for just over a year , I Know these stocks and trade them UP/DN .

To pick a stock that you are not familar with as a Short , would far to risky a proposition for the vast majorty of small traders ---- get to know the stock first.

Be careful of high Volume on a short , it is often the final sell off ----- same when approaching a major support level , generally a good time to bail out.

Cheers