| Perhaps you have been trading stocks for a long | | | | When the price tumbles, the short sellers can buy |
| time. You believe that you have mastered the art | | | | the stock at the lower price to cover their short |
| known as trading and want to go even further. | | | | positions, pocket the profit and return the shares |
| You think you are ready to play with the big boys | | | | to the owners. |
| now. | | | | Short selling is risky though. If the prices jump |
| All right then, step right up to the plate and get | | | | instead of drop, you will lose money. It is often |
| prepared for some advanced stock market | | | | difficult to easily speculate if a stock will fall. The |
| trading. | | | | historical tendency of the average stock is to |
| For advanced traders, using margin, selling short, | | | | increase in price over the long term. So the |
| getting into IPOs, and other quite sophisticated | | | | potential for loss is greater than the potential for |
| trading techniques and strategies can open a | | | | profit, because the short seller is going against a |
| whole new world of exciting trading experiences | | | | historical norm. |
| and potential profits. | | | | Margin Trading |
| Understanding IPOs | | | | Margin accounts can permit the trader to borrow |
| IPOs or initial public offerings are a highly visible | | | | money to buy stock. Margin trading uses |
| sign of the transition of a company from a | | | | borrowed money to increase how much stock |
| privately owned organization to a publicly held firm. | | | | the trader can buy. This money can be loaned by |
| Every incorporated business issues common | | | | a broker. |
| stock, although initially this is usually to a few | | | | If you were to buy a stock worth $1,000 on a |
| stockholders. In order for a company to raise | | | | cash basis, without the use of margin trading, you |
| necessary capital without incurring debt, one | | | | would have to dish out the full $1,000 dollars, plus |
| commonly used method is to sell stock to the | | | | commissions. But if you margin trade, your broker |
| public, thereby becoming a publicly traded | | | | can lend you up to half of the amount or $500 on |
| company. | | | | many stocks, and you only need to shoulder the |
| There are two ways to potentially make money | | | | other $500 plus commissions and interest |
| from these IPOs. | | | | payments. |
| First, the trader needs to get in early and buy | | | | If the stock gets you $10 per stock, profit will be |
| stocks through the initial public offering, hope for a | | | | based on the number of shares of stock you |
| large quick increase in share price, and then sell | | | | bought with $1,000. Then you can pay the broker |
| shares for a quick profit. | | | | back. If you did not margin trade, your profit |
| The other way is to sit back, watching and | | | | would only have been for the number of shares |
| waiting until after the IPO has begun. See if the | | | | of stock you paid for using cash. On the other |
| new stock is fairly priced. If its reasonable, then | | | | hand, were the stock price to go down, the loss |
| one would purchase the stock. | | | | incurred would be based on the entire $1,000, and |
| Shorting Stocks | | | | you would still owe the margin loan amount to the |
| Selling short is an advanced technique that many | | | | broker. |
| traders do not take advantage of. Short sellers | | | | Closing |
| look for the best stock to sell. Short sellers sell | | | | As with everything in life, there is a flip side to |
| stock they dont actually own with a belief the | | | | every coin. In many cases, the greater the profit, |
| value will come down by a significant amount in | | | | the greater the risk. Advanced trading is not for |
| the near future. The shares are borrowed from a | | | | the faint of heart, and you should only trade with |
| stockholder. The borrowing is done by each | | | | risk capital, not with money that you cant do |
| partys brokers. | | | | without. |