Wednesday, June 1, 2011

When Short Selling Profitable?

Is short selling is always profitable? Of course not. How can this happen? This happens if: First, A wrong analysis, such calculations are done A technical analysis is not accurate so that decisions are taken on short selling A is not appropriate. Tell the 15:00 o’clock and afterwards it turned out to GBP exchange rate strengthened to $ 1.8950. Thus, when the Rev A menu should deposit 1 lot GBP obligation to C, A must buy GBP at 1.8950 USD price. If by chance, B is willing to sell one lot at a price of EUR 1.8950 GBP, then the future of A should hand over the money of USD 189.500 to B.

Thus, at the time of settlement:

  • A receives the money, amounting to USD 188.500 from C
  • A paid USD 189.500 to B
  • A receives a lot of B GBP
  • A gives a lot to C GBP

A loss here suffer from USD1, 000, plus a fee for brokerage deposits, due to short-selling.

Secondly, losses can occur if A does not succeed get a lot GBP. This means that none of the investors who are willing mejual GBP, with a variety of reasons. In forex trading situation would never happen, because all transactions are secured. In exchange for the shares of such incidents fail to deliver-it-is still possible. To overcome the problem of losses due to unsuccessful getting this stock, can be solved by borrowing shares to other parties. Of course, along with certain bi aya (heliotrope). Parties who could act providing stock loans can come from fellow investors, brokers or CGC (Clearing and Guarantee Corporation).

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