Th Market Has Two Sides – Long & Short !!!

It never ceases to amaze me, whenever we get volatility in the markets, how the press and TV are full of images of ashen faced traders staring at their screens, which are covered in red. The pit traders look stressed and concerned, and the market analysts predict doom and gloom for everyone involved. The reason I am always baffled is this – there are two sides to the market, not one. All this tells me is that all the professional money trades the long side of the market, almost exclusively. This seems to apply to floor traders, fund managers, hedge funds and investment houses. WHY???? Do you see currency traders throwing themselves off buildings when one currency weakens and another strengthens – ofcourse not, because we trade both sides of the market. Any trader will tell you, that to trade one side is foolhardy in the extreme – why? Two reasons – firstly and psychologically you are always expecting the markets to move up, and therefore you will interprete any signal to reflect this view. Secondly, you are restricting your trading to only 50% of the opportunities available – complete madness.

In virtually all markets and instruments it is possible to trade both long and short, whether it is currency, options, shares, stocks, spread betting, CFD’s ect. I accept that in the cash share market it is more complicated as the shares have to be borrowed by your broker from another client’s account and ‘lent’ to you ( you are also responsible for any dividends during the loan period so you have been warned ) – but it is still possible to achieve. So whay have the so-called hedge funds all been long as well – the whole point of a hedge fund is ‘to hedge the risk’ – it only goes to show what a load of rubbish most people talk, and more importantly that if you are going to get involved with any of these so called professional investment vehicles or company’s, to know more than them!! – whether you are a retail investor or a professional trader, trading both sides of the market is fundamental to your success – trade one side and you will lose!!