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Message: shorts

Re: shorts

in response to by
posted on Nov 23, 2007 06:45AM

Hi Mikal!

The good traders do not need to resort to scams and manipulation to make money. Even the very best company will selloff at times. The markets are not efficient and stocks tend to get ahead of themselves at some times, and become oversold at others. The smart traders can recognize those times and become positioned either short or long to benefit from the price swings. You do not need to play games on a forum.

Any kind of manipulation is illegal. If your trading behaviour is executed specifically to influence the market value of a stock, then that is manipulation. However, trying to prove that is not as easy, and I suspect the regulators are not even trying that hard. So its a bit of a rigged casino in the markets sometimes. And yes, I suspect there are all kinds of scams going on where groups are acting illegally to suppress a stock and pocket the profits in a short sale.

The most important thing to understand is that all shorts must eventually be covered. The stock is borrowed, and if the owner of that stock decides they want to sell or transfer it, the brokerage that 'loaned' the stock can call it back, and force the short to cover whether they want to or not. So its most commonly a relatively short duration trade. For the longs, we face no risk from intraday volatility, no margin requirement, and we can hold forever if we wish without being compelled to close a position. So the trick is to recognize the scams and ignore them.

cheers!

mike

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