Some Quick Stock & ETF Trading Q&As

Hi Everybody, Bill Poulos here and I wanted to talk to you about some interesting questions I received the other day. I often do special one on one coaching sessions with my students, or we have webinars where we field questions too. It’s all part of our commitment to making sure our students truly succeed. And I’ve found it’s also a great place to see what traders need help with.

The first question I want to go over is about shorting stocks. Can we short stocks? Should we short stocks? Is it smart to short stocks? These are all common questions. And for those of you who are just getting into trading, “shorting” a stock means to see a stock, as opposed to buying one. Short selling is the sale of a security that isn’t owned by the seller, but that is promised to be delivered as in they “borrow” it from their broker and then sell it at hopefully a profit. Now it sounds a little complicated, but once you short sell a few times, it really isn’t. 

My answer is, first off be careful. Shorting stocks is not something a beginner should get into, and in some cases, such as an IRA you can’t short securities. BUT, once you know the rules, and the market cooperates, then you can do very well shorting stocks. Again though, be careful: GOing short requries even more vigilance than going long as the markets can become very volatile very fast. Someone also asked when you have an opportunity to go long on a security, or short on another, what would you do? My answer is always go long if you can. It’s easier. Less complicated and often carries less risk.

The second question I wanted to over with you today is what to do in volatile and flat markets. I have many students ask me what to do when the market is moving sideways and not trending very well. They get antsy and they want to trade. Unfortunately, my answer is STAY OUT. Yes trading is fun and trading is exciting, but you need to stay disciplined. These flat markets are nothing but trouble. You might enter the market and just watch your trade sit there, doing nothing, or even losing. Just step aside and wait for the markets to move again. There’s no reason to trade these markets when there are so many others that cold be trending nicely. Wait. Be patient. And wait for a nice smooth deliberate trading market to appear before you jump back in.

Then I often get the opposite question: “What do I do if the markets are volatile ” Or “What do I do before a new event?” My answer is the same as trading flat markets: STAY OUT. There is no reason to trade these markets! They’re too risky. If your charts are looking like a mess with extra long bars and huge wicks, it’s too volatile. And I always give the same reason: there are so many markets and trading opportunities out there that it’s just plain irresponsible to trade less than desirable markets. Don’t do it. Stay in cash and wait for the market to come to you. Don’t force the market because you can’t, and if you try, you’ll nine times out of ten end up losing.

I’ll be sitting in on a few more coaching sessions next week so I’ll be back with more questions and answers, but until then, good trading!

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