Robbie Burns
Robbie Burns's columns :
16/04/2008Move up to Another Level
31/03/2008Margins are a changing!
26/02/2008Trading too much?
14/01/20082008 COULD BE A GOOD YEAR!
21/11/2007Love the Shorts - but Short Term Only! >>
17/10/2007Oil be Blowed!
04/09/2007An August Of Panic
24/07/2007Trailing Stop-Losses

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at

Love the Shorts - but Short Term Only!

Goodness me - it's been a difficult market... for investors... but a fantastic one for traders!

My guess is that traders are having a great time. After all, what they need is good movement one way or another and those on the right side of the ups and downs are having a field day!

However, investors who tend to buy and hold are having a harder time; especially those that bought near the recent top.

With the markets so volatile I've kind of chickened out a bit and put 70% of my ISAs into cash for the time being until things settle down.

But I have also made quite a bit of money from "shorting". For newer investors that means making money by betting on shares to go down. I've taken down bets on the FTSE 100 and individual shares too and I've found shorting to be very well worthwhile.

Many investors find the concept a bit weird, some even believe it's "immoral" but I don't agree. You need all possible weapons to hand; after all it's a battleground out there!

How do you do it? The easiest way is spread betting - a spread firm will give you a quote on a share and you simply "sell" instead of buy and make money as it goes down. You lose as it goes up though.

Or... you can do it using CFDs which is the same kind of thing - again you can sell a share quote. In both cases you don't actually "own" the sold shares in any way.

My view with shorts is quite simple. I think they are a very useful tool and must be considered. But I personally feel they should be held short term. That's because often when shares start to bounce they can go up sharply, quickly wiping out any profits made from the downside.

For example, I've made nearly £9,000 from FTSE 100 shorts this year but I've never been in them much longer than a couple of weeks or so - these days it moves so fast any profit can disappear in a few minutes.

When shorting individual shares, I try and do it with shares that are in an out-of-favour sector such as (currently) banks or property-related companies. The one major thing I check is the spread. If it's more than four or five points I think twice about shorting as you have to conquer the spread first before getting into profit.

The one thing I'd always do: make sure a stop loss is set. Most spread betting firms offer "guaranteed stop losses". That means they will definitely get you out at the requested price though it will cost extra spread when opening the bet. But you can imagine that could be handy if a bid came in.

For example say you'd shorted Gyrus at 400p recently. You could have set a guaranteed stop at say 450p. A bid came in for Gyrus the other day - and the price soared to over 600p! Imagine how big those losses could have been without the stop. So it is something to consider.

My best wishes to all investors at this current time of volatility.

You can read Robbie’s daily market comments together with his latest buys and sells at his website

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