Overview
Short sellers borrow and sell, aiming to buy back lower. The strategy demands respect for unlimited upside risk, borrow cost and squeeze dynamics.
How it works
Identify an extended move or broken structure, define the level that invalidates the idea, and size so a squeeze is survivable.
Typical setup
- Extended move losing momentum
- Failed push on lower volume
- Hard stop above the recent high
Advantages
- Two-sided opportunity
- Downside moves are often faster
Risks
- Unlimited theoretical loss
- Short squeezes
- Borrow may be unavailable or expensive
- Halt risk
Common mistakes
- Shorting strength with no signal of failure
- Holding through a halt
- Using long-sized positions
Risk management notes
Short size should be smaller than an equivalent long, with a stop that is actually honoured.
This guide is educational. It is not a signal service, a recommendation, or a claim that this strategy is profitable. Trading involves substantial risk of loss.