When I look over my trade logs I can see I’ve always been a trader that tends to short stocks as oppose to going long. For one reason or another, the idea of going against the grain always appealed to me as someone who could take advantage of other traders’ fears. The old saying that “stocks take the stairs up and the elevator down” often holds true. Thus, I have found a lot of success being able to short into panic or levels of mass resistance.
Shorting was always done in futures and FX but shorting equities was historically uncommon. Although shorting is more common now, there is something psychologically assuring about buying a stock low and selling high. With many traders and investors being one dimensional in their thinking, it creates an important opportunity for those thinking outside the box. You could source thousands of examples, but the most recent one that comes to mind is the Facebook IPO. The majority of traders and investors were licking their chops at a chance to be long FB. They hoped we would see a return of the tech boom days where stocks would double or even triple on the first day going public. We all know the end result of this as $FB has dropped more than fifty percent since going public, creating a feast for the shorts. It is clear that by thinking outside the box, we create opportunities that others may be too blind to see. When we have an emotional attachment like so many had for $FB, it creates a distinct advantage for those who dare to be different.
So my fellow traders, I say to you: Do your bank account some good and Salute Your Shorts!
