Those of you who have been trading stocks long and short for sometime will know that the Title to this article makes perfect sense. Long stocks (buying stocks) takes much more precise entry and perfect conditions to ensure success. The reason is very simple, it takes much more strength to lift something as compared to bringing something down. Picture an airplane trying to take off, it takes enormous amount of fuel and the right conditions. But it takes a simple malfunction or bad weather or just about any unimaginable thing to make a plane crash. The principle is the same for stocks.
So, if you are long a stock (buying a stock), think about these before entering it.
When it comes to shorting stocks, you can be a bit sloppy and still make money. Provided there is a strong enough resistance above, it will take a lot to overcome that area. Sometimes even if the stock rises after you sold it short, you are given another opportunity to cover your shorts when the stock goes down again.
So, if you are long a stock (buying a stock), think about these before entering it.
- Is the general market condition favorable?
- Is there a clean beautiful valid setup?
- Are the higher time frame and one time frame lower showing favorable conditions?
- Are there earnings around the corner?
- Is the stock above its 50 and 200 MA?
- Are technical indicators showing oversold signal?
- Add any more conditions that affect your trading strategy. The more conditions your stock satisfies, the better your odds of success.
When it comes to shorting stocks, you can be a bit sloppy and still make money. Provided there is a strong enough resistance above, it will take a lot to overcome that area. Sometimes even if the stock rises after you sold it short, you are given another opportunity to cover your shorts when the stock goes down again.
