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Why Short Trades Are A Losing Bet

Published 08/18/2014, 03:45 PM
Updated 07/09/2023, 06:31 AM

Q: Why Will Short Traders Lose Money This Week?
A: They're Fighting A Bull Market That's Still Pointing To Higher Prices.

Take a look at the chart below of the S&P 500 futures index. You'll notice that the bars are color coded, which is done by my automated trading system, which identifies the market trend your trades should be in-line with.

The stock market remains in a full blown bull market. Investors should remain long for the time being. On the other hand, active investors should be trading with the current market trend, as seen on the chart.

Sharp And Short Lived

Market corrections within a bull market are sharp and short lived. As an active investor you will be luckly to catch one or two short trades during these pullbacks before the uptrend is retaken.

It's imporatnt to know that eventually one of these bull-market corrections will be the straw that breaks the camel's back and then kick starts a new bear market. And that's why I always move to cash and look to short each of these corrections. We just never know WHEN a full-blown bear market will start. If you are holding your positions through these corrections and think you’re a great investor, just wait until the market actually does break down, taking most of your gains with it. I admit, it's easy to get lazy with investments after years of rising prices. Laziness and a lack of strategy for a falling market is what causes 99% of investors to lose their money.

I believe in trading defensively. Sure it’s more work, takes time to follow and comes with extra commission fees. But that's a small price to pay to keep a majority of your gains.
The S&P 500 e-Mini Futures

Latest comments

Good read, good strategy.
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