I was mostly a long player until late last year when I saw ADSP go through the roof the day after Thanksgiving. I decided to short it at 37 15 minutes before the market closed. The next day it opened at 15, I covered a few days later at 12ish. After that I became very interested in shorting. I don't know if many of you follow Anthony Elgindy or not, www.anthonypacific.com, but I have learned an amazing amount about shorting in the past 6-7 months on his site, and the rewards have been phenomenal. I know he is very contraversial, but after following his trades and meeting him in person, I realized he has abilities in shorting securities that I have yet to see reproduced.
Getting off topic...I agree that shorting is much more risky, but the rewards far outweigh the risks, if you play shorts properly. Allocation is the key to shorting, I have seen many people not properly allocated in a position get destroyed when a short doubles or triples in price, basically they just got greedy. Properly allocated means allocated right so that if the stock doubles or triples in price temporarily, you will still be able to pull through and make a profit. Example: if you have 50k for a short position, you may take 10% of that to start a position at, say 55. If it hits 75, take another 10%, or whatever you feel confortable, until you are fully allocated as it rises. If it never rises above your initial 10% position, then you make a small profit, but high percentage return. If you feel strongly enough and have researched the stock properly, I would average up, starting with a small position, and averaging up from there. Stop losses have to be followed though as well. It's a fine line between knowing when to average up and when to stop out..
SCON, started shorting it at 24, was fully allocated when it hit 40, covered at 44 for a pretty hefty loss, watched it hit 105, and then shorted it all the way down to the 50's and covered for pretty good profits.
Bad short currently in, KREM. I started a position at 37, it's at approx 80. It has a P/E of over 100, pathetically overpriced. I am properly allocated and can ride it out. Of course, I should have placed stop losses, but am still learning...., but not over allocated, and will not loose my shirt.
Another reason for shorting, it to protect oneself against market downturns. During those few weeks when the market tanked from 4,000 to 3,000 on NAS, was my best weeks in profits ever. All the high priced stocks eventually come back where they belong. Just make sure you don't pick an ebay or yahoo:). SONS, ELSI, ECNC, COII, ZERO, STMP, GSTRF, ENBC, SINA, KEI, the list goes on and on..
chbartel |
