quinlash wrote: WARNING: Shorting a stock is one of the only ways you can lose more money in the markets than what you put into play so do a great deal of research prior to opting for trading in this manner.
If you are so sure that the price is going down you can profit from that, it's called SHORTING. If you want to short a stock you need what's called a margin account, it is not a typical account, so you need to specifically ask your broker to open one for you. When opening or applying margin to your account be sure to read all the documents associated with the option to fully understand the liability you are agreeing to as well as spend some time discussing “what if” scenarios with your broker (eg. “What-if the share price jumps back to the 52 week high or above”.
Shorting is available in Canada on regular taxable Self-Directed Investing Accounts however is not permitted on TFSA or Self-Directed RRSP accounts. Those with existing Self-Directed Investing Accounts would require Margin to be enabled on the Investing Account in order to place “Short Orders”. To enable margin on an existing trading account will take apx 2 to 3 business days.
When you invest “Long” you are buying shares with the expectation that the share price will increase over the period that you are willing to remain invested for. When trade Short you are betting that the value of the shares will decrease over the period of time you are willing to remain in the Short Position.
Gains on Long Positions are unlimited as there is no real maximum price where a share price can go up to. When you trade Short the returns are limited as there is a maximum downside. Trading Short is therefore the most high-risk trade on the stock market and should only be used by traders with a great deal of experience and those who know how to manage the potential of uncapped losses should a share price suddenly jump upwards unexpectedly. Due to these high risks it is certainly recommended that a stop-loss be applied OVER the price where the short-position is taken out.
Here's How it Works
https://www.youtube.com/watch?v=CAs_aX95tVQ
Here's why it's not a smart move
https://www.youtube.com/watch?v=6T0MSUjsHlo
What happens when your short goes wrong.
https://www.marketwatch.com/story/help-my-short-position-got-crushed-and-now-i-owe-e-trade-10644556-2015-11-19
A novice trader in a Short-Position they may try and "help" drive the price downward and often show up on chat forums to post really negative things proclaiming the stock will go down, the sector is going no-where, the CEO is an idiot etc, etc. These sort of posts are done by people who can be considered HUMAN GARBAGE as they are really trying to scare investors into not buying or selling their current shares... bit of a DIRT BAG move. It is not the concern of the novice short-seller if another investor (especially new investors) gets sucked into garbage posts on a forum. Larger Hedge Funds with low morals will actually pay to have articles published in popular Newsletters that paint the stock in a negative light and often post mis-leading negative outlooks in order to discourage buyers but also instill the thought of selling into those currently holding shares in the Long position. NewsLetters that are optimistic on the stock (Bullish) will sometimes include disclaimers at the bottom of these article indicating that they recommend the stock. Be sure to know fact from fiction when trading Short or Long, also be sure to note this while reading articles and chatter on Stock Forums.
Here's the Basher's Handbook to help explain how it works
https://cdn.ceo.ca.s3-us-west-2.amazonaws.com/1dr223l-Anatomy%20of%20a%20Basher%20-%20Do%20and%20Don%27t.pdf
For those investing Long on a stock with the expectation that the share price will increase over time is simple. As the short traders try their best to beat the share price down the stock may (and often does) start to trade very cheap. Those who have worked out fair market value on the shares will often be presented with the opportunity to purchase shares well under the fair market value and hold those shares for when the share price corrects back towards it’s fair market value or higher.
Take some comfort in knowing that those who short are REQUIRED to buy all of the shares they place in short at some point. They can only do this with shares available for sale on the market or by posting their “cover” / “buy” order at a low and waiting for someone to sell them those shares at the lower price. The other option for short sellers is to purchase call options or stock warrants to later convert to shares and cover the short.
Something to consider, just try and play straight-up on charts, typical stock moves and such, don't be a dirt-bag.
Q
- Long on HEXO and does not recommend Short-Selling.
For more information on short-selling be sure to Google terms such as “top 10 short sellers”, “short seller attack”, “how to benefit from short selling”, “advantages and disadvantages of short selling”, “the risk of short selling”, “Short selling gone wrong” etc.