There are additional risks associated with shorting stocks, for example:
- When you buy a stock normally you can basically hold it indefinitely even when the price tanks. When you short a stock and it goes up, at some point your broker will have to force you to recall your position and you'll have to realize your losses
- When you buy a stock normally the maximum amount you can lose is the original investment amount. When shorting a stock, before a forced recall, in theory the downside is unlimited (and the upside is limited).
- stonks go up (in markets that are generally doing fine), so in general it's not a good idea to keep a short position on markets (unless you believe the country in question is trending towards destruction). A recession may come but stocks don't necessarily have to reflect the actual economic conditions in the short term.
In general, I'd say use it sparingly. Probably not a sound "investing strategy" but more of a short to mid term speculation tool, or a tool for hedging long positions.
- When you buy a stock normally you can basically hold it indefinitely even when the price tanks. When you short a stock and it goes up, at some point your broker will have to force you to recall your position and you'll have to realize your losses
- When you buy a stock normally the maximum amount you can lose is the original investment amount. When shorting a stock, before a forced recall, in theory the downside is unlimited (and the upside is limited).
- stonks go up (in markets that are generally doing fine), so in general it's not a good idea to keep a short position on markets (unless you believe the country in question is trending towards destruction). A recession may come but stocks don't necessarily have to reflect the actual economic conditions in the short term.
In general, I'd say use it sparingly. Probably not a sound "investing strategy" but more of a short to mid term speculation tool, or a tool for hedging long positions.