What do you think about short-selling? Does anyone practice it more often than going long?
What do you think about it? Is going short riskier than going long? Could it be more or less rewarding than going long?
As one who goes both long & short, I have noticed a curious thing:
Short positions are more stressfull (when the market is moving against you) than long.
I am not sure why this is, but I suspect that we are hardwired to think that markets generally go up (this has after all been the experience of the last 100 years) and so, when caught short, one feels additional stress because one is aware that one is fighting 'nature' (a very wishy-washy term).
I think that may be a personal quirk of yours. I don't think there should be a preference either way. The position / trade is either right or wrong, the degree to which you let it hurt is largely within your control be it long or short.
The reason for this is that fear drives markets down but greed drives them up.
It's also true to say that there is usually a topping pattern before markets start to fall, but rallies can be started from nothing (This is the reason I have tighter stops on falling markets than rising ones). Think how many times you get a "V" bottom and how many times you get a "V" Top (i've yet to see a "V" top).
Please consider this thought; people are more resistent to sell than to buy usually, right! However when the prices want to go down, they go down not necessarily because there are more people willing to sell than to buy, but those who are willing to sell, are willing to sell for a much lower price than the previous ones, and this causes a crash. Those who start the selling are profitting from their very early purchases and those who eventually follow them when it's already too late are the so-called... suckers! However there is always more resistence to sell than to buy, and the price-falls are not necessarily because of huge selling volume but lack of buyers at an overinflated price.
Am I right?
There are two types of trading possibilities; going long or going short. Going long means you think the value of whatever you are interested to trade will increase in the future, so you buy them to sell later, simple. When you go short you think the value of whatever you are interested in will decrease, so you use your margin account in order to sell what you don't own yet, then no matter what happens you must cover your short position, that is to buy back the amount you sold.