Monday, November 19, 2007

Ugly Day in the Markets

Wow, the last few days in the market have not been kind.  Today my regular portfolio took a hit of about 2%.  Over the last month, I've lost several dollars in the market.  Lucky for me, I haven't quite jumped into the market yet with this money, but that should soon change as I plan to start trading sometime late next week or the week after that.  With as ugly as the markets have been doing, I may have to do something I normally don't do, which is short stocks.

When you short a stock, you basically are betting that the price will go lower.  However, there is unlimited loss potential.  When you buy a stock, it can only go to zero.  When you short a stock, it could in theory go to infinity.  When you short, you have to watch the stock closely, and be ready to close your position at any time.  I'm not in front of my computer at all times (although at times it feels like I am), nor do I plan to be.  There are other strategies I could employ in a bear market, and I may just have to do that, but I'll have to be a little creative.

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