This Essential Trading Tactic Ensures Success in the Markets

Andy Snyder|January 12, 2023

Yesterday, we wrote about walking into a room and being able to dispatch any threat that comes our way.

It’s a controversial idea. But there’s no doubt that it produces a winning mindset.

We have to conquer all in every situation. We can’t afford to lose. The cost is grave.

As we showed, the same mentality makes winning investors. Too many folks think they can win only when the bulls are in town.

When they get in tough situations like we have right now, they panic. They never figure out how to defeat the big man in the back.

We mentioned a variety of ways to get the job done in our essay yesterday. There are option contracts, specialty ETFs, diversification… you name it. But one of the simplest ways to win when so many others are giving up in defeat is to play the market’s downside.

We do it quite often in our popular Alpha Money Flow research service.

It’s very easy. If you can buy a stock, you can do it. If you can buy an option… you can do it even better.

Many folks get confused by the idea of “shorting” a stock. When we speak about it at conferences, we see eyes glaze over. Folks wrongly believe it’s a weapon that can be used only by sophisticated investors.

It’s not.

Having the know-how to short a stock is essential. It ensures you can succeed no matter what.

In other words… if you’ve gotten your butt kicked over the last 14 months, pay attention.

A Short Path to Success

In the simplest of terms, we short a stock when we believe its value will go down. Mechanically, we’re borrowing the stock and selling it, with the intent to pay back our loan at a later date.

Think of it this way…

Let’s say the Ford Pinto makes a roaring comeback with millennials. They like the nostalgia of the thing.

They’re willing to pay top dollar for any Pinto they can get their hands on.

Your buddy has one in his barn. He’s excited. He thinks it’s worth a mint… and that the price will be even higher in a year.

You disagree.

So you make a deal with him. You’ll borrow the car from him, sell it today and buy it back for him a year from now.

You sell the steel beast for $20,000, pocketing the cash.

Now the wait is on.

If the price of Pintos falls, you win. If the price of Pintos rises, you’re in trouble.

But wait… somebody just got rear-ended, and their Pinto went up in flames. Those things are fire traps!

Millennial nostalgia plummets. Folks can’t even give the things away.

The scrap value of the car you sold is now just $1,000. You fork out a grand to buy it back and close out your loan.

Your friend wears a frown when he finds out the paltry amount his car is worth… but you’re all smiles as you walk away with a $19,000 profit.

The same kind of deal plays out on Wall Street thousands of times each day.

Brokerages, institutions and even retail investors are sitting on countless shares of stock. Looking to add a bit of a kicker to their portfolios, they lend them out, hoping to make a few extra bucks.

You can borrow those shares… sell them… and pocket some cash if they’ve fallen in value when it’s time to buy them back.

Shorting stocks is not hard. And when the big boys are saying the market could fall another 20%, it can be quite lucrative.

When everything seems to want to kill you, it takes an “always win” attitude to thrive.

This is one way to get there.