Why Shorting Is Difficult
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Short selling was in the spotlight in 2021 because of several short squeezes, the one in Gamestop being the most spectacular. Additionally, stocks are at an all-time high in terms of valuation, commodities are on a roll, and real interest rates are in negative territory. But, unfortunately, profiting from a bubble that bursts are insanely difficult. Many are tempted to sell short, but….:
Selling short is extremely difficult because you are betting against the upwards bias, at least in the stock market. Perhaps, even worse, you need to pay fees and interest for the privilege of being short. Moreover, all markets tend to drop fast when they do fall, while most markets rise slowly and gradually. If you want to profit from short selling, it’s all about market timing. The truth is that short selling mostly involves luck and randomness.
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