So today we talked about the difference between going long and going short. So hey everyone, I'm Lee Train with Stocks trade Tim Bowen So there's two real directions to trade. Obviously what we're gonna look to do is trade stocks that are going up and we make money when we buy low and sell high. Now might sound very simple, but a lot of people misunderstand some of kind of the intricacies and that's what we're going to go over today.

and then also when we talk about going short, a lot of people think oh okay, short-term trading like day trading or scalping. And yes, there is such a thing as short-term trading. which is most of what we do when we're talking about day trading or swing trading. Even in you know, the real world.

As we say, uh, swing trading is still considered a short-term strategy because it's over days or weeks now. When we talk about going short, we're talking about looking to make money when a stock goes down. And yes, that can happen. And yes, you can do it.

A lot of people think Short Selling is reserved for like hedge funds or big Banks Etc uh no, uh, any retail Trader can short stocks. So let's get started. Jump back to the beginning and when we talk about going long um and again that same same thing with going short a lot of times when newer Traders Here going long they think you're means you're buying the stock and holding for long term. Now that would be more what we would call investing so it's easy to confuse.

So if You're like long short, why don't I get this. It's not the best terminology you know you go back into like history and it's like I think they could have chose different terms for this but they're the terms we deal with. So that being said, when we say go long, we're looking to buy a position in that stock with then the anticipation to sell higher for profits or sell lower for our stop loss. Take that loss and move on.

Now remember with any trading strategy, that's what trips up a lot of people. You got to understand that losing is part of trading. Losing is part of trading. Losing is part of trading.

Okay I say that three times because so many Traders Uh, let their ego get involved, evolved and they want to win and they don't want to be wrong Like that's that ego talking. Nobody likes being wrong. Okay, your your wife you know proves you screwed something up or your husband or or your boss I Mean it doesn't You know you make a mistake and your boss points it out into you in front of the entire staff. doesn't feel good.

You know nobody likes that even though you knew you made the mistake. So understand losing is part of trading. That's why we always have a stop loss. But in this scenario, let's say we're looking to buy a breakout.

So this is a stock that's gapping up big on news. Oh, it has unusual volume. Uh, ideally in a hot sector. You know, maybe it's like artificial intelligence? You know right now as I record in the summer of 2023 hottest hot Sector I have seen maybe ever I Mean if this hot sector keeps going a few more months, maybe the hottest hot sector I've seen in 17 years.

But we want that big that Catalyst that price action, that volume and the chart pattern. So let's say hypothetically we're buying this stock that's up trending from say 60 70 cents into the high 90s and we're gonna buy that breakout at a dollar and then we're gonna risk 90 cents. Okay, so say we got a thousand shares risking 10 cents a share. So a nice good risk.

You know, small risk. You lose, You know, 100 bucks. Not bad. Not gonna torture.

Um and then our goal is say a buck 30. So when we go long, we buy on that one dollar break. We immediately set our stop loss because you're a responsible Trader with risk management right in that 90 Cent area or maybe that 89 area area, then if that stock continues to Trend up. Awesome! We're looking for a three to one risk to reward ratio.

We're looking to sell at about a buck 30 because again, we're as day Traders We're just looking to capture small pockets of opportunity several times a day, every single day to get that daily paycheck from the market. So let's say that stock Works spikes up into the buck 30s. We take our our gain and we move on. So that is a long trade.

We bought low, we sold higher now. Vice Versa Maybe some news hits, maybe the market shifts, and that's we buy that socket a buck Fades back down to 90 cents. We stop out. We take that small but acceptable loss.

So those are the three variables of a long trade. our buy, our goal, and our stop. And again, we made 300 bucks on that 30 Cent move. We would have lost 100 bucks on that downside move if the trade didn't work.

Now let's go on to short: Zone Okay, a lot more uh, details and intricacies on Short Selling So I'm going to start out with the price action and and how we enter and exit these trades. Then we'll move on to some of the things that a lot of people don't let a lot of people frequently. Overlook So think about the same trade. Okay, let's let's use the exact same stock.

Exact same example. So that stock is now bumped, bumped up from 50 60 70 cents all the way up to a buck 30.. Okay, the long guy, the guy that traded it on the uptrend he sold. He's moved on.

He's taking his nice gain. Now you're a Trader that's short, biased, or just looking to trade. Uh, price action. You know we love volatility.

As an experienced day trader, you'll learn you don't really care if the volatility is up or down. We can trade direct no with no directional bias. So let's say that Stock's really struggling with a buck 30. And it kind of starts fading back, fading back, and can't reclaim that buck 30 level.

So let's say now, you're gonna short a thousand shares with that same risk management profile of three to one. So let's say just to keep the numbers easy for me. Normally you'd probably short like when the trend breaks in the low 120s. but let's say you shorted a buck 30.

Just keep the math the same for me and you're risking 10 cents of upside. So if that stock trends back up, reclaims the trend, you recognize the price action. You're like whoa, this is no longer a short. So that 10 cent upside move would cost you that hundred dollars.

that hundred dollar loss vice versa. You think that if I short this stock because it can't continue to break out really struggling volume is fading. Maybe the overall Market is shifted. You know the indexes are selling off into the end of the day.

So you like this risk management and then you're looking to cover back down and a buck. Same risk management profile up down. 10 cents of risk for 30 cents of reward. So that stock does fade, cracks, sells off into the end of the day.

Remember this stock in this scenario started out at like 50 60 cents on the day. So there's plenty of downside. Stock washes out as we sell you cover. you buy the cover and a buck and you just made your 300 bucks while risking 100 bucks.

To the upside, Okay now few turns when we're going long, we talk about, you know, buying and selling. That's basically all you do. You're either buying or selling. Now remember with short selling, you're doing it in reverse.

Now this is where I want you to take out the notepad? All right. So you're actually this is where it gets confusing. You're selling before you buy. You actually take a negative position.

Now I Know that's confusing, but you're like this is right. Okay, first time you hear it, it'll go over your head. You actually borrow shares from your broker. Okay, you borrow them.

You pay a small fee to do that, fees and interest. but then that allows you to take a negative position of that stock. So going back to our scenario when you shorted it a buck 30. if you looked at your brokerage account, you would actually have negative 1 000 shares in your account.

Negative 1 000 shares at a buck 30.. Now that stock collapses and we now buy to cover, So we're buying a thousand shares to take us back to neutral where before we're buying a thousand shares, we have a positive position and then we sell those shares to go neutral. We're now reversing that negative position. buy back the shares, go neutral to zero shares, and collect the premium Buck 30 to a buck 300 bucks in your account.

So again, maybe watch the video twice. Once you understand is just reverse, you're still buying. Uh, you know, keep in mind with short selling, people kind of overlook this. You're still buying low and selling High Ultimately, it's just you're reversing them.

Now you're selling and then buying. So you just like the guy that went long, maybe the same guy I Mean if you're an agile Trader You might have went long in the morning, you might have bought it a dollar, sold it a buck 30, and then in the afternoon sold at a buck 30 and bought it a buck and collected the same premium both up and down. So short selling is amazing if you understand these these rules and you understand the risk. Okay, one thing with going long stocks can only go to zero when you short a stock.

Remember the higher it goes, the more money you lose and it can get bad very fast. So hence the reason I Recommend people get consistently profitable, learn how to trade going long, then start short short selling and experimenting whether on paper or very small shares until you get the mechanics down, Because when these stocks move fast, you got to know. Okay I need to buy to exit this position I need to. You know they're all I need to do all these things I've had it happen actually is one of the bigger losses of my career.

where I was trying to cover a stock I was trying to buy shares and actually hit the wrong side of my order box and actually sold more short. So this Stock's rocketing up and I doubled my short position on accident. which means it doubled my losses in seconds. So that's why I want you to start out very small.

start out: paper trading on the short side, trade 10 shares, trade one chair until you understand the mechanics. So that being said, my friend, if you like this video and you really want to get more in depth what we're doing every single day at Stocks trades, we do what's called The Daily Income Trader webinars. We're doing these webinars six times a day, starting out at 8 A.M Eastern all the way up to 9 00 PM Eastern and they're 100 live through the trading day 100 free as well. So it's really a great way to get live commentary, live trading, and really get a detailed tour of the stocks to trade platform.

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