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Short term trading

How you can make money on short term trading and why it is better for inexperienced investors to forget about this method.

An investor can earn on the difference in quotes in two ways. The first is a long position. In this case, the investor plays long and buys shares in order to then sell them at a higher price. A short term trading means that when trading securities, the investor earns on the fall of the stock. In this article, I will tell you how traders make millions on such transactions.

How to make money on depreciating stocks

A short position is of interest to the investor, since, as a rule, shares become cheaper faster than they rise in price, and with the right choice, the profit of a bear can be really serious.

To open a short position, an investor borrows shares from a broker against the security of money in the hope that the securities of this particular company are overvalued and their value will fall in the near future.

The investor then buys the shares at the current price and then waits for them to fall in price. It is assumed that when and if the share price does fall, then the investor buys the same amount of securities that he borrowed, but at a reduced price.

Before choosing a company whose shares can be shorted, a competent investor thoroughly studies its history, financial statements and finds the key risks that threaten the company.

The investor receives profit from the difference between the purchase price and the sale price. That is, you could borrow shares from a broker and sell them for $10. The stock then went down to $5, at which point you sold it. So your profit was $5. True, from this profit you will pay a small commission to the broker. In addition, if you suddenly return the shares when they pay dividends, the broker may require you to pay them too.

It is worth noting that selling shares from your own portfolio cannot be a short position. When you sell shares that you bought earlier rather than borrowed, you are closing out a long position.

Shorting pros

An experienced investor who correctly predicts the behavior of the securities of a particular company can earn very serious money on shorting. A textbook example of successful shorting is George Soros’s game against the pound sterling in 1992. Soros managed to earn $ 1 billion on the “black environment”.

What are the risks of short term trading

The problem is that a short position cannot be opened for a long period. This means that after the expiration of a predetermined period, you will still need to return the borrowed shares to the broker – regardless of whether the securities have fallen in price or not. Therefore, if the shares that you bought at $5 rose in price to $10, then in this case your loss, not profit, will be $5.

This is one of the main risks of a short position. When you buy stocks in the hope that they will rise in price, then your losses are limited – if you spent $100, and the securities fell to zero, then you will not lose more than $100.

In the case of a short, your loss can be anything, because the stock can rise in price from $100 to $1000, and you will have to buy them at this price in order to repay the broker.

An example is the recent situation with investors from Reddit. They specifically bought large quantities of shares of companies that, according to investment funds, should have become cheaper. Due to the actions of the participants in the popular forum, the value of the shares of companies such as the AMC cinema chain and the game retailer GameStop, on the contrary, began to rise.

GameStop

According to some estimates, shorts have lost about $5 billion due to the rise in GameStop stock alone.

Tesla

Another example of an unsuccessful short is the story of the relationship between investor Jim Cheinos and electric car manufacturer Tesla. Cheinos has been betting Tesla shares for five years. According to the investor, the first four years everything was not bad. Then in 2020 the shares of the company headed by Elon Musk have risen in price by 700%. “It was very painful,” admitted a well-known short who made $500 million shorting Enron stock in the early 2000s.

In addition, going short is not only risky for the investor, but also for the broker who lent you the stock. Therefore, the broker may set certain conditions for the borrower. For example, a broker determines how much money a client’s brokerage account must have in order to open a short position. Moreover, the broker can forcibly close a short position if the stock suddenly starts to rise. The share price at which the position can be closed forcibly is also negotiated in advance.

Another nuance is that not all stocks are open for a short position. The short trader’s choice is limited to the most liquid securities.

What is short term trading squeeze

Such a situation, as in the case of GameStop, can lead to a short squeeze.

A short squeeze occurs when the stock of a particular company suddenly rises in price, and several short sellers are forced to close the position at once in order to minimize losses.

This can push the price even higher, which will attract the interest of ordinary investors to the securities, who are also starting to buy. In this case, the remaining short sellers are forced to buy shares even at a completely unfavorable price. Thus, the price can rise for a long time, and short sellers will find themselves in a very significant minus.

How to protect yourself when use short term trading

It is better for a novice investor not to try to make money on a short position, as this is simply too risky an option.

To avoid big losses, experienced investors use stop-losses – exchange orders that allow you to automatically sell shares when they reach a certain price.

Also, the same rule applies to a short position as to investing in general – don’t invest more than you can afford to lose.

FAQ

What is short term trading, or short?

A short position, or “short”, means that when trading securities, the investor earns on the fall of the shares that he borrowed from the broker.

How much can you earn on shorts?

An experienced investor who correctly predicts the behavior of the securities of a particular company can earn very serious money on shorting. A textbook example of successful shorting is George Soros’s game against the pound sterling in 1992. Soros managed to earn $ 1 billion on the “black environment”.

What are the risks of a short position in trading?

The problem is that a short term trading cannot be opened for a long period. This means that after the expiration of a predetermined period, you will still need to return the borrowed shares to the broker – regardless of whether the securities have fallen in price or not. Therefore, if the shares that you bought at $5 rose in price to $10, then in this case your loss, not profit, will be $5.


Disclaimer: This article is not investment advice. Assess the risks yourself before making any investment decisions.
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Detailed analysis of investment platform

Choosing a quality investment platform is a difficult task. Investing in the first project which you see is not the best idea. Using this approach, there is a high probability that you can lose everything. You need to clear analysis of the chosen site to make a profitable investment. Unfortunately, it is impossible to completely protect yourself from losing money, but you can minimize the risks. What should a potential investor pay attention to first of all? How to understand which of the projects is suitable for making money without losing investments? Without which components an investment platform cannot exist? In my article we will consider such issues as: project analysis, what it is for and how to carry it out.

An analysis of an investment platform is a set of actions that every investor must complete before investing their money.

The main criteria for evaluating an investment platform are reliability and costs of its creation. The more the administration spent money on preparation, the more serious and long-term the project should be. Also, one of the main rules for choosing an investment site is the experience of the project creators. Pay attention to previous work, if it possible. If they gave a big profit to investors, then most likely it will be the same in the new investment platform. There are a large number of examples of platforms that have worked for more than a year.

The main things in the investment platform

And so, a list of what you need to pay attention to:

  1. marketing;
  2. project legend;
  3. uniqueness and quality of design;
  4. technical support;
  5. advertising promotion in financial areas;
  6. the solvency of the investment platform.

Let’s consider each item separately in order to understand them in more detail.

Marketing

The first step is to pay attention to the percentage of profit. If you want to make big profit in a short time, you need to invest in fast platforms. The percentage of earnings is from 5% to 50% in a day, possibly higher. I do not recommend investing in these projects. Since, this is a too risky form of earnings. Such projects often run from several hours to several days.

If you are not so extreme, then I advise you to invest in medium-income (from 0.8% to 3% daily) or low-income projects (from 0.8% – 3% per week).

A more detailed article on types of investment sites is here.

You should pay attention not only to the percentage of profitability, but also to the thoughtfulness of the plans in the project.

It is not worth investing if:

  1. There are useless plans (the minimum deposit amount is $1000 or more);
  2. High interest rates, usually in fast projects (for example: 300% after 24 hours);
  3. A mixture of plans from low, medium and high-interest projects (for example: 5% after 1 day (minimum deposit of $ 10), 30% after 2 days (minimum deposit of $400), 100% after 5 days (minimum deposit of $ 1000)

There are three types of accruals at the platform:

  1. The deposit is included in the charges.
  2. The deposit and interest are calculated at the end of the term.
  3. Daily accrual of interest. The body of the deposit is returned at the end.

The first option is preferred. This way you can reduce the loss of money in the event of a stop in payments. Be wary of plans with money back at the end. You can invest in them, but try to choose a shorter period.

Conclusion

Invest in platforms you like. You can understand this only by your own experience. If you like highly profitable projects, then do not forget about period of their existence. You need to open fast deposits as soon as possible after the start. You can watch medium and low profitable projects for a while. Don’t waste your time seeing interest rates that are too high. Average percentage of earnings from 1% to 4% daily. Don’t forget to evaluate the platform from all angles.

Legend of the project

In most cases, the creator disguises the investment project as the activity of a real company. For this, the administration comes up with a legend of the appearance of profit. It is needed so that people believe in a registered company and are not afraid to trust their money.

Many people underestimate the importance of the legend and think that it is not important. And they are wrong. The quality of the legend and its confirmation will determine the number of investors and the success of the project.

For guerrilla investment platform (they work without design), the legend is not required. In most cases it is absent.

The essence of the legend is that the creator explains to investors the emergence of profit from what kind of finance it is paid to investors. It is advisable if the legend is thoughtful and looks realistic. This means that the platform owner did not just copy the idea from others, but came up with something special.

Investment platform advantages

It is good when the site contains a lot of details confirming the legend. In expensive and prepared sites, you can find:

  1. Documentation. Registration certificate, licenses and certificates confirming the official registration of the company. The more documents you see on the site, the higher the preparation costs. And also a high probability of getting a profit. Investment projects are registered in offshore zones, because for this you just need to pay a certain cost and provide the documents of the owner of the company. You can check it to verify the reality of the documents. For example, a company that was incorporated in the UK can be checked here.
  2. Video. A video presentation recorded by a real person costs a lot of money. For beginners, this video inspires more confidence. And seasoned investors will understand that the creator is set for a great job.
  3. Telephone numbers. If the site contains phone numbers of the company, do not be lazy to call them. In the case of your call, there may be several options. Such a number may not exist, the answering machine will work, and in the best possible way, the consultant will pick up the phone and answer your questions.

Conclusion:

Try to invest in a project with a well-prepared and well-thought-out legend, as well as the presence of certificates and licenses. A big plus is the availability of supporting documents for the conduct of activities. Do not be lazy to check their reality. But you should never forget that investments are associated with the risk of losing money. The platform can stop payments at any time. Remember that a legend is just a fiction. Taking risks and making money, or getting a stable salary at work, is everyone’s choice.

Site and its components

The first thing we see when we open a site is its design. It should be beautiful, compact, and it should contain all the necessary information for an investor: from tariff plans to a technical support telephone.

The second aspect that a potential investor should pay attention to is the uniqueness of the design.

You can check it in two ways:

  1. Google image search. You need to upload a screenshot of the home page to Google Images using the camera icon. Next, you need to compare the found pictures with the screen and check if there are similar ones among them in design. In the same way, you can check other pages of the site.
  2. Aggregators of investment project. You can find information on the uniqueness of the design in them : whether it was previously used in projects or not. I advise you to use these: ISP, HYIPLOGS.

The next quality by which the design of a project can be judged is layout. The location of the site structure. If you see irregularities in tables or inscriptions that go beyond the boundaries of the site, then the site is not completed or was made in a hurry. Refrain from investing or watch further development.

Look for the availability of language versions of the site. The bigger, the better. Also, the site should not use a translator. It should be static and translated by a professional translator. If you know foreign languages, evaluate the quality of the translation. A project in which there are language errors suggests that the owner did not want to give it due effort.

Conclusion

Invest in platforms with a beautiful and original design that looks smart on all devices. Also pay attention to the content: text and images must be unique.

Contact support

In any project, problems may arise: change of the inviter, funds did not come to the wallet, the details were not correctly registered, etc. To resolve issues, you need to contact technical support. It is important that she solves all your problems as soon as possible.

A big advantage on the site is online technical support, which should work during the day, or better around the clock. With any question that arises, it should help you. Also, in the contacts section, there should be contact addresses for solving the problems that have arisen and checking the speed of their solution. Such as: email address, links to profiles on social networks, or details of instant messengers (for example, telegrams).

Conclusion

Invest in investment platform with good feedback. A good project is one that will solve all your problems in the shortest possible time.

Analysis of advertising activities

The creator needs to promote it so that potential investors know about the project. The main way is to buy ads from bloggers, post information on economic forums, Google adv, Yandex Direct. Estimated starting price per blog starts at $ 100. That is why the administrator needs a lot of capital for promotion.

Active promotion of the project at its start should alert and stop the investor. The creator quickly pays back his costs and earns a decent amount of money.

Optimal advertising activity is a smooth development: the project buys a small amount of advertising and gradually buys it in addition over time.

You can check for promotion in the following ways:

  1. Search bar. You can drive in a link to the platform and see who advertises it.
  2. Use the services of statistics of investment projects. I recommend: ISP, HYIPLOGS. On these resources you will find complete information, including a list of blogs and monitoring, advertising the project.

For the development of the project, administrators come up with incentives for those who invite new investors. Example: make a video review, write about payments in chats, etc. There is nothing wrong with this, and on the contrary, it helps the development of the site. Alertness should be caused by stocks that promise big favorable investment conditions in case of opening a new deposit.

Conclusion

Try to invest in projects with a smooth start. It is necessary smooth and gradual development for project long life. Bypass projects that actively call for a new deposit under super favorable conditions.

Check solvency

Stable payments from investment platform is the main thing that should interest an investor. The preparation of the project does not matter if it has stopped payments.

You can check it in two ways:

  • Chat with investors. Do it on forums or telegram chats. You can go in the chats of blogs or monitoring telegrams and ask about the project’s solvency for the given minute. Also, you can always contact me by any convenient means of communication.
  • View project status on aggregators. I advise you to use the statistics services: ISP, HYIPLOGS. In them you will see the exact time of the project status change on all monitors. I advise you not to rely on the status of just one monitoring. They are an additional source of information. You can find the presence of all open themes of the platform in the overview of projects on my blog.

Conclusion

Before any investment, always check the payments of the platform. Take the time to analyze forums and statistics services to get a complete picture of the project. If you are concerned about something, look for additional information before investing.

Post-investment analysis

After making a deposit, you do not need to relax. You should always monitor the situation in the project, because it can stop payments at any time. Alarming signs can be:

  1. Connecting aggressive advertising.
  2. A sharp change in tariff plans or a referral program, as well as holding generous promotions “make a contribution of $ 1000, you will receive a second one of the same as a gift”
  3. Any negative feedback from investors. For example: blocking an account.
  4. A drop in the number of investors, as well as a decrease in website traffic.

Conclusion

It is necessary to carry out constant monitoring of the project. Don’t forget that your money is there. At the first sign of a scam, withdraw funds immediately. It is better to make less profit than to end up losing everything.

Conclusion

Analysis of investment platform is not an easy set of measures that every investor must learn to do. Unfortunately, without it, you will not be able to make money in this area. I recommend following all the tips of my article and do not forget about the risks of investing.