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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Re: Working the market this week
I thought it was funny that he took a break to go "for a walk and to pray."
The most common objection has to do with the so-called "unlimited risk" of shorting. The idea here is that if you place a short sale and then permanently ignore it, the stock could theoretically increase in price forever. As a result, you would accumulate greater and greater losses over time - hypothetically to infinity. When you compare this scary interpretation of "unlimited risk" to the "limited risk" of buying stocks whose value can only drop to zero, it seems like a reasonable argument against shorting. A closer look reveals the truth.
Basically, anyone who enters a position whether long OR short, then walks away and ignores it is asking for serious trouble. Every trade should be entered with a planned exit, and then monitored for performance. If the trade moves in the wrong direction, you have to get out. But let's suppose that someone DOES enter a short position and then just walks away from it. There is a limit to the amount of loss they may incur, for if the losing short-trade reaches a level that puts their margin status in jeopardy, the brokerage firm will attempt to contact the trader. If they get no response, the broker will close the trade to protect their margin.
Far more traders lose money in long trades than short trades. In reality short sellers tend to have better results because they have taken the time to learn how to trade both sides of the market. What this really means is that educated traders do better . . . period. "
I was reading up on shorting stocks, which is what the guy did in the OP article. I found this, and it was pretty helpful...
http://www.rightline.net/education/shortsales.html
The above quote is from this article. I totally agree with the bolded. Although, I cannot short stocks (they are in my retirement IRAs, which cannot legally be used for shorting), I do agree with not doing the "park it and leave" mentality of retirement planning. I think this guy is correct. Everybody needs to have an exit strategy and needs to know at least the basics of what their retirement portfolios are doing - definitions, terms, learning to analyze charts, etc.. Any time I come across a term I don't know I do an Internet search to learn more. Doing this consistently even for a few months...it's amazing how much you can learn.
All of my retirement is self-directed - I have decided on my own where to put the money. It takes some time and patience.
As much as I know, IF I had funds free from IRA and could do shorting, I still don't know if I would. I think it takes a special kind of guts.