Why Bet On A Falling Price?
- A rising financial market is called a bull market; a falling market is called a bear market.
- Investors are happy with a bull market – they buy and watch the prices rise.
- Historically, when the ‘bull’ turns into a ‘bear’ only a few investors (usually the professionals) were able to make a profit. Most investors simply had to wait until the market turned into a ‘bull’ again.
- However spread betting allows you to bet on falling prices as well as on rising ones.
Don’t Forget: Spread Betting gives you the opportunity to make a profit in both rising
(bull) and falling (bear) markets.
(bull) and falling (bear) markets.
Long And Short Compared
Long
- When you bet on a share price rising you are said to take a long position or go long
- You buy a bet expecting the price to rise
- If the price does rise you can sell the bet at a higher price than you bought it for – you make a profit
- However if the price falls you may have to sell the bet at a lower price that you bought if for – you make a loss
Short
- When you bet on a share price falling you are said to take a short position or go short
- You sell the bet expecting the price to fall
- If the price does fall you can buy the bet back at a lower price than you sold it for - you make a profit
- However if the price rises you may have to buy the bet back at a higher level than you sold it for – you make a loss
Long And Short Compared
- Long and short bets can be made for all durations, including daily bets, rolling dailies and quarterlies.
- When we make a long bet a stop loss is placed below our opening price to protect us from a falling price. However when making a short bet a stop loss is placed above our opening price to protect us from a rising price.
- Remember, markets can only go in two directions: UP or DOWN. So being able to trade in both directions can open up more opportunities for you.
Now that we know what a Short position is, let’s have a look at an example
To Sum Up
- A rising stock market is called a bull market, a falling one is called a bear market
- Historically only a few investors were able to profit from a bear market … until now
- Going long refers to buying a bet and selling it later. In a bull market this strategy will make a profit
- Going short refers to selling a bet and buying it back later. In a bear market this strategy will make a profit
- Being able to go short as well as go long can open up more trading opportunities for you