How Do You Pick an Investment to Short?

How Do You Pick an Investment to Short?
How’s Your Gap Analysis? Complimentary Training is Here.

Predicting Investment Success or Failure

Some investments require unique knowledge to succeed in. And for others you simply need to understand intrinsic value and invest for the long term. Patience is a virtue in this case. Picking an investment to short requires that you recognize when that investment no longer is likely to grow with the economy and the rest of the market or when there are unique factors that will lead to its demise. We wrote about what are the most profitable investments.

Best Time to Short an Investment

The couple of years preceding the housing market and stock market crashes a decade ago were exuberant. People bought stocks as well as second and third homes with the belief that prices would only go up. Warren Buffett famously said that the best time to buy is when everyone is getting out of the market and the best time to sell is when everyone is getting in. The key for picking investments to short is to calculate intrinsic value. The key to timing the market and making the most profit when shorting an investment is technical analysis. This is the statistically based analysis of market price patterns. Technical traders say that the past predicts the future and that when you can recognize an emerging price pattern you can trade accordingly to make a profit as the pattern plays out. Using statistical analysis to predict a peak in the value of an investment helps you choose when to short an investment and when to buy back at a lower price as the pattern plays out. As a bull market ages it tends to become volatile. That volatility can be an asset when you pick an investment to short.

Two Chart Signals to Learn — The Bobble & T-Line Crunch Patterns

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