Why Are Shorts Better?

On another thread, someone said this:

Can anyone explain to me why this is?

I would have assumed it was the opposite.

Some people find that shorts tend to drop in price faster and more dramatically than bullish breakouts, so they offer more gains in a shorter time. But I think this is based on company stock price tendencies, not applicable in forex.

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They also show your legs much more.

But the person you’re quoting above, IMO, was joking. He was responding to a question specifically about bear markets and was simply observing that in a bear market, a short trade has a higher chance of being a winner than a long one. I doubt very much whether he intended anything other than to raise a smile. :grinning:

Better not even go there … :open_mouth:

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You are correct in your assumption that being long is mathematically lower risk & higher reward than taking short positions in non-forex assets.

I believe the poster you’re quoting is making a tongue-in-cheek joke about it being better to be short than long in a bear market as the title of the thread is “What should a beginner know about trading in bear markets”

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Yes, well said. I would just add that it is usually panic selling and margin calls that lead to faster and more dramatic price drops than price rises in non-forex markets.

Having said that there are market conditions where margin calls and panic buying can lead to volatile and dramatic price rises, which I suspect we’ll see in the commodities space over the coming months and years.

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You know you’re a n00b when the jokes go over your head. :sweat_smile:

But what did you mean by this?

Are you saying that the bearish moves are more obvious than bullish moves on the charts?

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Why the distinction about forex/non-forex assets?

Is it because forex markets reflect national currency game theory instead of the growth thesis that most assets have?

Somebody collected/collects data on this? wow!

Shorting a stock or commodity:
Risk = practically infinite as there is no limit to how high the price can go (price of nickel shot up +200% in a matter of hours after a series of margin calls in March 2022)
Reward = limited as the price of the asset can practically only go to zero

Shorting a forex pair like EURUSD assuming zero leverage
Risk = limited as governments want stable currencies to facilitate trade, i.e. no currency pair traded on the interbank network will go to zero or infinity
Reward = limited for the same reason

@samewise

No not really, just look at a gold or Nasdaq chart over decades:

  1. There’s an inherent upward bias as the 2% inflation rate set as “official accepted rate of inflation” set by most central banks degrade the purchasing power of a currency over time by the same rate. In other words, prices “naturally” go up because a currency buys you less and less each year.
  2. If you shorted gold in 1970, the most you could have made is $35/oz if the price went to zero but your losses if you held your shorts until now would be -$3,050/oz. The exact opposite if you had gone long. :grin:
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Oh man really good info.

I’ve never thought about the currencies limited from going to zero idea. Thanks for the lesson!

No.

I’m saying that if you wear shorts, people can see more of your legs than if you wear long pants. :jeans:

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Well if you’re shorting in a bear market your’e going with the trend.

Personally I have a 50% win rate shorting and a 66.67% win rate going long but I am fairly new to trading still so that’s a bit meaningless as it’s only from around 50 trades.

Sounds like the person was old school
Back in the day it was easier to pick the tops

These modern times
They are both equally achievable with same results

For me, I noticed that I can’t survive so long with long entries. Impatience is another simple reason. I can’t sustain longtime drawdowns which long-term traders have to.

Mr McGavin you are a serious asset to this community, please drop in more often
:+1:

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Over My Head

Well played. :clap::clap::clap:

You’re the GOAT :raised_hands::raised_hands::raised_hands:

Thank you!

As someone with an inherent bias towards taking shorts I approve this post!

I have no data to back this up, I just can see short setups easier than I see long setups for some reason.

Actually, taking short entries have become my norm because the market is thrilling and indeed I lack the patience and gut to keep an entry open for a long time. Short entries give opportunity for taking multiple entries a day so sometimes the return becomes more.

I have some questions pls help me out how do i proper get my market structure and daily bias analysis right