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Offlineiluvfungi
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Day Trading (short selling on margin)
    #10655854 - 07/11/09 02:58 AM (11 years, 7 months ago)

Hey if you are really in debt and want to make money here is exactly how todo it.

Sign up for an account on Zecco (it is the cheapest at 4.50 a trade). When you sign up, hopefully you have some cash to deposit to the initial account. Then you sign up for a margin account, heavily inflate the amount of cash you have as liquid.

Now you can trade stock with other peoples money. Right now stocks go down heavily each day. Short selling is exactly this process; you buy a stock (a percentage is borrowed), you immediately sell the stock. The stock goes down, then you rebuy the stock at a lower price, and that repays the stock that you sold; thus making a profit since you sold the stock for less than you paid for it.

Right now the stock market is going lowerer each day. For Zecco, the minimum for shorting a stock is a $5 stock. So do a google search for stocks just above $5, that have a high volume (equals higher trading) and you are golden. Only buy and sell a stock in a single day, and use your instinct. Never hold on to a stock more then one day, you will run into trouble.


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OfflineCakes
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Re: Day Trading (short selling on margin) [Re: iluvfungi]
    #10655905 - 07/11/09 03:12 AM (11 years, 7 months ago)

You can't day trade on a margin account with less than $25,000 equity.

http://en.wikipedia.org/wiki/Pattern_day_trader


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OfflineCakes
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Re: Day Trading (short selling on margin) [Re: Cakes]
    #10656420 - 07/11/09 06:45 AM (11 years, 7 months ago)

However, if you use a cash account you can buy and sell as much as you want given that you don't violate the free ride rule.  This rule is based on the fact that most stocks take 3 days to clear.  You can't use the money you make off this stock until it clears, even though you have already sold it.  However if you have excess money in your cash account that was not involved in that trade, you are free to use that money.  This makes it a bit difficult because your assets are always tied up waiting to be cleared, but if you only use a small portion of your spendable assets for any given trade, you can day trade all you want.  You just need to do some good planning and make sure you don't go over the amount of spendable money available to you.

If you do violate this rule and spend money from a trade before it clears you will be warned or more likely penalized by your broker.

I'm only just learning this stuff so I can't give you the exact details on how this works, however what I just explained pretty much covers it.  Do a little bit more research on the subject before you delve into it.  A Google search for "day trading" "cash account" will turn up some results.  They will need dug through as there seems to be a good amount of confusion on the subject, but the correct info is out there with a little bit of searching.


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OfflinegeokillsA
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Re: Day Trading (short selling on margin) [Re: iluvfungi]
    #10662534 - 07/12/09 01:04 PM (11 years, 7 months ago)

I'm not here to say that short selling is a bad idea, I myself sell short fairly often.  However, the original post for this topic is a little misleading, failing to note the potential draw backs of this investment strategy.  Short selling is inherently more risky than standard long-side investing.  There are a few reasons for this including the fact that the upside for any given stock is potentially unlimited, and therefore you can potentially lose more than you initially invested (losses in excess of 100%).  When you go long a stock, you can only lose the amount you invested, because the stock will always stop at $0.

Another factor to consider is that short sellers are often more informed investors.  They get into their positions early, and are typically more mindful of their exit strategy than long side investors.  Losses on a short position can balloon very quickly, and if you do not place protective stop orders on your position, you can get burned very quick.  Earlier this year, I found myself down over 70% on an intra-day basis in a short position I placed on Capital One Financial (COF)... and that 70% loss occurred in little more than one week's time!

Make sure to pay attention to the short interest in a stock (the % of the float that is currently being sold short).  The larger the short interest, the more likely that there will be a snap-back rally that is energized by short sellers rushing to cover their positions as the stock appreciates in value, thereby causing the price appreciation to be exponentiated. It is not uncommon to find stocks with 10, 20, sometimes even a 50% short interest!  So if a stock with a heavy short interest takes a positive turn, not only are buyers buying the stock to go long, but short sellers are buying the stock to cover their positions, causing even more upside pressure which then causes more shorts to panic cover.  When stocks spike higher on short covering, it is called a short squeeze.  In fact, if you see a heavily shorted stock that has fallen close to a support level and may have a positive catalyst on the horizon, it is not a bad idea to go long in anticipation of the short covering that will likely soon commence!

All things considered, short selling is a valuable strategy, but it should be incorporated into a more comprehensive investment strategy.  Telling people to just go out, pick up a margin account and start selling short is irresponsible.  Know your risk tolerance and keep yourself informed.  People can get lucky, but in truth there is no fail safe way to get rich quick in the stock market.  It's a tough (and often humbling) game to play.


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InvisibleExistence
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Re: Day Trading (short selling on margin) [Re: iluvfungi]
    #10662611 - 07/12/09 01:25 PM (11 years, 7 months ago)

Borrowing money to gamble is a good way to lose everything.


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OfflinegeokillsA
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Re: Day Trading (short selling on margin) [Re: Existence]
    #10662634 - 07/12/09 01:28 PM (11 years, 7 months ago)

That's another good point that I didn't emphasize enough.  Trading on margin is risky in and of itself... to advocate that a newbie investor trade on margin and short sell right from the get go is just plain reckless. :nonono:


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InvisibleStonehenge
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Re: Day Trading (short selling on margin) [Re: Existence]
    #10662682 - 07/12/09 01:37 PM (11 years, 7 months ago)

Quote:

Borrowing money to gamble is a good way to lose everything.




That's a fact jack. I do happen to think the market is headed toward another drop but it may rally before that happens. I hope it rallies enough for me to dump my ge stock although it will bounce back eventually. I may dump all my long positions if we see a rally in the next week or so.


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“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” (attributed to Alexis de Tocqueville political philosopher Circa 1835)

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Unfolding Nature Shop: Unfolding Nature: Being in the Implicate Order

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