September 19, 2006 at 10:41 am | | Comments 1

How to Get Short

On the heels of my order types post, I wanted to point out a useful tool to direct-access traders which only the more active day traders are likely to already know. Active traders who diversify are willing to trade both sides of the market, and aside from the uptick rule, getting filled on a short sale order is often the hardest part to catching the trade on the dark side.

Direct-access trading platforms offer hotkey choices to traders, allowing you to set up specific keys for sending out designated kinds of orders which are routed through your chosen venue. I have found that the ARCA market short/sell is probably my most valued hotkey for a couple of reasons. When I want out of a long position, I hit that key to send out a market sell order, regardless of whether I’m trading a listed stock or a Nasdaq stock. However, that same key is also the one I use when I am short selling a stock and need to enter the trade quickly. And fortunately for me, my trading platform automatically checks whether I’m already long, short, or flat so that I don’t need to set up different hotkeys for selling vs. short selling. For those of you hunting for the best direct-access broker, you might want to consider whether or not you’ll have to send out different order types for selling and shorting. Personally, I like to keep things simple!

The ARCA market short/sell is a proactive order, which means it will effectively ‘chase’ the market lower until either your order is filled or you cancel the order. On Nasdaq stocks, I find that using this key will get me into the trade almost instantly (it is scary fast), and on listed stocks (NYSE) it does a great job of helping me get filled when I want to get short.

Remember that short selling in a strong market can be tricky, but there’s still opportunities out there to catch pullbacks if you look for them in this environment. Once you find them, if you aren’t using the ARCA market short/sell order, you should be. It will make a world of difference to those of you who are willing to trade the short side.

Jeff White
President, The Stock Bandit, Inc.

[tags]Stocks, Investing, Stock Trading, Trading, Short Selling, Diversification[/tags]

Related Articles:

Trackbacks: 1  |  Trackback URL

  1. From Finding Short Sale Candidates | on Jun 12, 2007

Sorry, comments for this entry are closed at this time.