#TradeStories #StrategyTrade

Trend channels: they are exploited by accompanying the trend, or by individually exploiting each of its rises and falls; riskier is trying to predict and anticipate the change in the trend.

Lateralizations: most of the time the market is not trending, but lateral, and in these circumstances the regression to the average can be exploited.

Volatility explosions: they can occur as a market reaction to news or external events, and open exploitation opportunities in short time frames.

Momentum: the force or impulse underlying the price action is evaluated because it is estimated that, if it is sufficient, it makes the continuation of the movement more likely.

The strategy incorporates short sales as a significant part of its activity. Shorting a stock entails borrowing securities from another party, most often a broker, and agreeing to pay an interest rate as a fee. A negative position is subsequently recorded in the investor’s account. The investor then sells the newly acquired securities on the open market at the current price and receives the cash for the trade. The investor waits for the securities to depreciate and then re-purchases them at a lower price. At this point, the investor returns the purchased securities to the broker. In a reverse activity from first buying and then selling securities, shorting still allows the investor to profit.

Short selling is much riskier than investing in long positions in securities; thus, in a investment strategy, a manager will put more emphasis on long positions than short positions. Short-selling puts an investor in a position of unlimited risk and a capped reward. For example, if an investor shorts a stock trading at $30, the most they can gain is $30 (minus fees), while the most they can lose is infinite since the stock can technically increase in price forever.