Going Long On Going Short

Michael’s recent review of Short Screen raised a lot of comments from readers over risk and how best to manage it. Personally, I don’t think going short on a stock is riskier than going long. In fact, in some cases going short can be less risky. The key isn’t whether you go long or short, the key is knowing what you’re doing and that’s the problem with most investors. They don’t know.

The same is true of blogging. Most bloggers never make more than a few dollars with their blogs because they don’t know how to properly monetize it. The key to everything is knowledge – the more you know, the better your chances of success. If you want to learn about making money by blogging, you can read my blog, Problogger, Copy Blogger and others. If you want to make money shorting stocks, then sites like Timothy Skyes and Short Screen are a good source of knowledge.

I Don’t Want To Learn It, I Just Want To Make Money From It. Is That Possible?

It’s pretty hard to make money from blogging without learning how to do it. However, it is possible to “auto trade” the stock transactions of a successful trader. I will be the first to admit that I will never be as good at shorting stocks as my buddy Tim Skyes. However, I can dupicate his trades using Covestor. The service monitors Tim’s account and if he makes a trade, I will make the same trade within two minutes.

Covestor allows you to auto trade the accounts of many traders. They rank each trader by performance (Tim is the #1 ranked trader with 146,540.3% return since Nov 2007). The one downside is you need a minimum deposit of $50,000 to auto trade Tim’s account. Don’t have that kind of money? Then you can take the longer, but potentially more rewarding, route of learning this stuff by reading Tim’s blog or becoming a member of Short Screen.

Happy Black Friday!


30 thoughts on “Going Long On Going Short”

  1. Kevin Pasco says:

    This is actually really interesting to me. Thanks for the info John, I’m going to go have a look now!

    Screw going out on a Friday night 😛

    1. What, you’ve given in to not even leaving your coomputer on Friday night now?

  2. What do you think the market is going to do in the next few months John, up or down? I’m thinking big crash with the Dow heading below 4,000.

    1. John Chow says:

      As long as interest stays at its rock bottom level, you won’t not going to see the market head down by much.

      1. Forex Review says:

        Good insight John – you know what you are talking about. You would enjoy this read which gets a little more descriptive of those thoughts, http://www.jcls-forex.com/eurusd-forecast.html

    2. market still in strong uptrend tough. 😉

      1. Strong UPTREND??? Which market are you speaking about? SY

        1. Brian P says:

          My thoughts that we are at the bottom right now. We will start gaining and get a little bit back….. But investors will take these gains and cash out. This will happen a couple of times till people really see that things are going up!

          1. I don’t think we have reached the bottom — yet. As long as people are able to over spend on their credit cards, economy will go down imho, SY

      2. Its mixed we could be on an uptrend but long-term I am scared due to the high inflation concerns. Invest in Brazil

    3. Never the market will not fall that significantly even in the worst crisis ever the last two years the Dow only fell to 6,500. We are on a uptrend long-term not a downtrend.

  3. Zee says:

    Like many money making successes, only 5% makes 95% of the money. So, trade wisely guys. I got burnt, and ain’t letting it happen again.

  4. Joseph says:

    When you go long, you can only lose what you put in. When you go short, your potential losses (at least in theory) are limitless.

  5. but John, short is still riskier than long in my opinion. It is because stock tend to rise in natural, so we should really know what time to end our short position.

  6. Michael Kwan says:

    Yowza. 146,000% return in two years? That’s almost unfathomable.

  7. Dean Saliiba says:

    I’ve said this before. I have no idea how the stock market works. That is probably why I own shares in Millwall Football Club that are now worth less than a penny each. 😛

  8. Right now I feel that investing in any kind of paper is risky, and am inclined to recommend gold as an investment safe haven that is currently still waayyyy undervalued. All tangible commodities are good.

    1. Agreed inflation is causing worries, Gold will become a strong asset if our dollar continues to devalue.

  9. Andy says:

    I frequently trade on the UK market. I find it much easier to make money trading large FTSE100 companies than penny stocks, even if the percentage gain will never be more than a couple of digits.

  10. Zee says:

    Will the recent Dubai financial market fracass brings us to the second wave of crisis?

  11. If you read into the details Tim Skyes isn’t as great as he sounds, he fakes some of the gains on covestor by not distributing real info on how much he puts in each position etc. Feel free to google his name and read what the real trades/hedge fund managers say about it and why he has never been offered a job on the street. Tim Skyes is barely making over $1 million a year where if he was that good of a trader for a top bank such as Goldman Sachs or J.P. Morgan then he would be raking in over $5-$10 million if not more. Its a fraud scheme and personally I would never recommend reading his blog.

  12. @crowdmanage says:

    “Personally, I don’t think going short on a stock is riskier than going long. In fact, in some cases going short can be less risky.”

    Respectfully, I am going to have to totally disagree with this statement. If you go long the maximum you can lose is 100% of what you invested. (As I did with my smart investment in Enron!)

    If you go short, but the shares rise in value, you then have to purchase them at this higher amount. How much is that higher amount? It is limitless. Thus you are exposed to a massive risk that is unknown at purchase.

    Imagine you had decided to short Volkswagen before the massive swing in its share price saw its market capitalization hit $364 billion, making it the most expensive company in the world. Many experienced hedge fund managers were on the wrong side of this trade.

    Shares prices do move sharply, particularly those thinly traded and small caps. If you are going short, then you could well be in for a nasty shock.

    I recommend The Intelligent Investor by Benjamin Graham (first published in 1949).

    1. Colin says:

      I have to agree. With long you know what you can lose. Going short the the consequences can be exponential.

      Didn’t you see Casino Royale?

      …. or did you just say that to get a good debate going John?

  13. David Pinsen says:

    Questions about short selling and risk came up in the comment thread following Michael Kwan’s original review of Short Screen. I summarized those questions and addressed them on my blog, if you would like to take a look, “Short selling and risk”.

    The Intelligent Investor by Benjamin Graham is an excellent book. I have read it and would recommend it as well. Regarding Graham, you may be interested to know that one his first teaching assistants and proteges, Irving Kahn, is, I believe, still an active investor at over 100 years of age. Kahn is no stranger to short selling. In fact, an article in Smart Money several years ago noted that one of Kahn’s first big investing successes was with a short:

    Along the way, Kahn got to know many of Graham’s famous disciples, including Warren Buffett. A gutsy Kahn wasn’t swept up in what he calls the “crazy market” of the late 1920s. In fact, his first trade in the summer of 1929 actually was a short sale of Magma Copper that turned out to be a winner in a few months.

  14. videostar says:

    Thanks for recomending a great author to read.The example is really inspiring!

  15. Playing the stocks is like gambling. Been burned too many times. You will lose in the long run if you don’t buy for the long run.

  16. videostar says:

    It is necessary to stop at the right moment.But it is impossible as it is seen!

  17. oes tsetnoc says:

    Michael always write his best

  18. chester says:

    146000% return is pretty good. I’d settle for a lot less!

  19. stocks are like gambling, where we cant judge when it will high and get drop..

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