| Short selling is
the sale of securities which the seller does not own. In a typical stock
transaction (long position), an investor purchases a stock with the hopes
of it increasing in value. By contrast, in a short position, the investor
sells a stock which he does not own, in the hopes that the stock will
decline in value so that the investor can purchase the stock later at
a lower price, thereby “covering” his short position.
The only way to make money on a short sale is if the
price of the stock drops subsequent to the investor initially shorting
the stock.
Note that short selling requires that you have a margin
account with your broker and would be subject to the $25,000 minimum
account size to daytrade. For smaller accounts you can simply not take
the short trades. Our track record indicates that the average return
per trade is nearly the same for both long and short trades, so your
daily return will work out the same in the long run.
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