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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: TechTrader42 who wrote (11958)	12/11/2001 9:21:52 AM
From: KyrosL	Read Replies (1) \| Respond to of 12039

I think % profits on shorts depend strictly on how much capital you commit to each short. Theoretically, a short requires zero capital, so any gain is an infinite gain. In practice various brokerages require various amounts of capital to maintain the same short. As the price falls, the capital required decreases. Assuming that you follow a conservative strategy of maintaining capital equal to the present value of the short, and assuming the price decline is linear in time, the % profit on a stock that goes from 40 to 10 would be 30/25*100, since the "average capital" required to maintain such a short is 25.