Short Selling Concept - iHandbook
Short Selling Concept

Short Selling Concept

During the fall of the market, some people would think of short selling. It is wise for professional traders but unwise for individual investors.

When you buy up, your profit is unlimited, and loss is limited to the price going to zero only and no more. But when you sell down, your profit is limited to the price going to zero, but loss is unlimited for the price will go up incessantly. Don’t think you loss is limited to all the money you paid for deposit. It is a zero sum game, for the winner is earning unlimited, therefore your loss will cover all the money you earn in the past and future and not just limited to the money inside your stock account or bank account. It will cover all your other assets, investment accounts, properties and every single asset in the past and also in the future.

So if you trade for the company, they can have hedging to lower the risk, no problem. If you use your own money, it is quite risky, for individual investors would not do hedging. In the past, the chance of a single stock going up incessantly that even the banker were unable to buy back to cover, it only happen once every decade, like the GME of 2021. But if you are the unlucky one, you can only live once. For those that think the market would fall, can buy the ETF of SQQQ, all your loss is limited to the stock price only in such a case.

Risk control is above all. Never do something you will regret.

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