Short selling

[Billyb]

Have been reading into this a bit lately.

Sounds like a good idea, an opportunity to make money in both bull and bear markets instead of just bull markets means there are more stocks to make money from.

However, I am interested in people's experiences in the Australian market, which I think is quite different to the US market.

I've noticed Commsec only seems to allow short selling for intraday trading. Not interested in such short term trading. I'm more interested in shorting a falling stock over a longer term, if that's possible.

Comments?

 

[NeuromanceR]

Sounds like a good idea, an opportunity to make money in both bull and bear markets instead of just bull markets means there are more stocks to make money from.

It also gives you another way of... losing money.

 

[Billyb]

It also gives you another way of... losing money.

True. Like any investment strategy, it's important to fully understand the potential risks before taking it on.

 

[nunthewiser]

True. Like any investment strategy, it's important to fully understand the potential risks before taking it on.

well done.

i use http://mfglobal-px.rtrk.com.au/
and http://www.cityindex.com.au/

I pay too much compared to others here that claim to use better brokers ( IB ) apparently, but i drift along and havent had a problem yet........ even when it comes to pulling cash out

 

[nunthewiser]

ignore commsec short selling facility

its a recipe for disaster

the position is closed at there discretion instead of yours

but hey....some people like that sort of thing

 

[Billyb]

ignore commsec short selling facility

its a recipe for disaster

the position is closed at there discretion instead of yours

but hey....some people like that sort of thing

Thanks. Will look into those resources you've provided.

 

[cutz]

However, I am interested in people's experiences in the Australian market, which I think is quite different to the US market.

Depends what you want to short,

Stocks with good options turnover can be shorted quite easily using synthetic equivalents if you don't want to go down the CFD path.

 

[ROE]

Have been reading into this a bit lately.
I've noticed Commsec only seems to allow short selling for intraday trading. Not interested in such short term trading. I'm more interested in shorting a falling stock over a longer term, if that's possible.
Comments?

There are other ways to skin a cat if you are with comsec, the best way to short a stock is with options but this only limited to the biggest of the big on the ASX
around top 20-50 stocks.

Sell a Call and Buy a Put with exact same expiration date and Strike price ...
if the stock drop, the Call will be Worthless and the Put will be in the money and you come out ahead if it dropped more than all your combined fees.

Say a $50 stock dropped to $30, you have would have made handsome amount
if you sell a $50 Call and Buy a $50 put

and I think that is what Cutz is talking about

 

[pavilion103]

I am completely open to opinions and do not have a fixed on in regard to this below:

If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?).

Is the only way to go short by trading CFDs?

I want to use Interactive Brokers, so I am assuming I'd need to create a secondary account to go short?

Sorry I am new so fairly basic questions.

 

[skc]

I am completely open to opinions and do not have a fixed on in regard to this below:

If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?).

Is the only way to go short by trading CFDs?

I want to use Interactive Brokers, so I am assuming I'd need to create a secondary account to go short?

Sorry I am new so fairly basic questions.

You can go short the conventional way... but you need to find the right broker. I was told that you can even do it with Commsec but see disclaimers above. IB now has a small selection of the companies that you can go short with - check the IB thread for more information.

As to whether a great trader will trade both ways... yes it is limiting if you don't have a short strategy. Having a shrot strategy increases your trade opportunities - and all else being equal, more opportunities = higher return. There is a saying that all good traders eventually move towards trading futures - and the ability to go long or short just as easily is a major reason. But there is no reason why you can't be a great trader who trades long only.

 

[Wysiwyg]

Shortable ASX stocks with CFD = 182. Shortable ASX stocks by IB = 161.

Some traders short the indices and long trade stocks.

If you're going to use the services of Interactive Brokers then knowing the service will be greatly beneficial.

 

[IFocus]

I am completely open to opinions and do not have a fixed on in regard to this below:

If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?).

Is the only way to go short by trading CFDs?

I want to use Interactive Brokers, so I am assuming I'd need to create a secondary account to go short?

Sorry I am new so fairly basic questions.

Not so much great traders but yes ideally you look to go short in a bear market remember prices fall faster that they go up so you can make fast profits but beware that a falling market behaves differently to a rising market.

I use IB and its the same account you just enter a sell order instead of a buy order.

The advantage of IB is you can put in the complete order i.e sell at x price with a limit that you are prepared to chase then put in (a bracket order)the profit target buy at X price and your stop loss buy price then you no longer have to watch the market second by second.

Better still once you have opened your account with IB they let you open a practice account so you can practice all the order types to see how they all work and test any system you want with out losing real money I still use mine to test various ideas.

IB have lately expanded their stocks available for short selling on the ASX to around 161.

Link here for the current IB list http://www.interactivebrokers.com/e...try=australia&tag=Australia&ib_entity=llc&ln=

Hope this helps

 

[skc]

Shortable ASX stocks with CFD = 182. Shortable ASX stocks by IB = 161.

Some traders short the indices and long trade stocks.

If you're going to use the services of Interactive Brokers then knowing the service will be greatly beneficial.

Wow that list for IB really expanded since their first launch.

 

[IFocus]

pavilion complete hypothetical shown below of the chart AWE and what the order would look like on IB for a short position of 10,000.
Note the sell order has a limit on how far to chase price Stop Limit entry

Also this has the bracket order for the stop-loss and the profit target set as well

IB is a thing of great beauty compared to Australian broker offerings

Hope this helps

.

 

[IFocus]

Wow that list for IB really expanded since their first launch.

Cannot remember what they had on entry to the Australian market they did have a few but then for what ever reason ditched the ASX short selling.

At the time it didn't bother me as there are 14,000 stocks to short in the US but nice that they now have a fairly good selection

 

[Superboot]

Hi all,

I have been trading a lot of small cap stocks on the long side, however am I right in thinking that to trade similar stocks on the short side is not available via CFDs or directly through a broker such as IB?

Cheers

 

[IFocus]

Hi all,

I have been trading a lot of small cap stocks on the long side, however am I right in thinking that to trade similar stocks on the short side is not available via CFDs or directly through a broker such as IB?

Cheers

The broker has to be able to rent / borrow shares of a stock to offer to you to short sell. This normally comes from major players who wont be selling stock and use short selling as a way of generating a small income.

These major stock holders wont be holding large amounts of small caps that I take it you are talking about so hence lack of available shares to short sell.

Short answer is not likely

 

[Caveman]

How long can you hold the position with IB?

 

[IFocus]

How long can you hold the position with IB?

Same as any broker as long as you want.

 

[cudderbean]

I use First Prudential DMA CFDs (Direct Market Access)..important if you want to avoid market makers manipulating the price.

They have a list of 250 shortable stocks.

http://www.fpmarkets.com.au/

I pay .08% brokerage.

They also do OCO orders... One Cancels Other as outlined by another forum member above.. set a Stop Loss and simultaneously set a Target Profit. Whichever one is hit first cancels the other order.

As pointed out above, prices move very quickly if a support level is broken.. and they can bounce back quickly once they hit the next support, so take care.

Good profits to be made though in a bear market.

One thing I love about CFDs is that you can cancel or amend an order in nanoseconds...important in a fast moving market.

Good luck mate.