How To Go Short

Happy new year? Surely Crappy new year is more like it for the  markets so far.

Whether it’s Brexit, Trump, US vs China, building debt, there is always something to worry about.

And what happens if 2019 turns out to be a whole year of crappiness?

How are you going to make any money? Well, probably you won’t.

Hardly any private investors go short. I don’t know why. I know when I start talking about it, eyes roll. And minds shut down.

I am going to talk about it now anyhow. It’s my column so tough.

Right, that’s now got rid of most of the readers. Attention spans these days.

I notice people think they will find it too hard to go short on say the FTSE or Dow when markets are tanking. They think, “I can’t do that!”

You can. This is how easy it is.

1. Open a spreadbet account. I tend to use spreadco.com/nakedtrader for my index bets as it has the smallest daytime spread on the FTSE at 0.8. Most others do a point. 
2. To place a short, click on “uk 100” (the FTSE) or “US30” (the Dow).
3. Click “trade”. A window pops up with a sell arrow or a buy arrow. Inside the sell window and buy windows you get the price. Say 6860 to sell, 6861 to buy.
4. Click on the sell window. Then put your stake in the stake box.. Then press confirm and voila you are short.

This means if you did a £1 stake, every time the index goes down a penny you make a quid. But every time it goes up a penny you lose a quid.

To take a profit or loss anytime in the future you just press “x” or the “close” button depending on the provider. 

There isn’t any cost apart from the spread and a small amount to keep the bet open every day (a few pence unless you are putting on huge bets). 

That’s it. It really is simple. I don’t know why people roll their eyes. You’ll see the money you made or lost go up and down every few seconds.

Rewards can be big. Let’s say the FTSE fell 1,000 points early this year. For a fiver a point you’d make five grand.

Obviously you don’t want to lose a packet. So you can put on a stop loss. After all you don’t want to lose 5 grand. Put the stop well away or else you will get stopped too fast.

For example at £1 a point you go short at 6860 but you don’t want to lose more than £200, so set your stop 200 points higher at 7060. 

Be careful with stops as they widen outside market hours.

Drawbacks? It could get addictive and if you have gambling tendencies or self-destructive ones, leave it alone! Make sure you understand what you could lose before putting on the bet and check it isn’t going to ruin you if it goes wrong.

Benefits? You’ll make a lot of money if the market tanks which will stop you crying so much about your shares going down.

if you want to read more then the Naked Trader Guide to Spreadbetting is on Amazon (edition 2 is the latest). Or my website www.nakedtrader.co.uk.

I really hope this year isn’t crappy. But if it is, a short or too could ease the pain.