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SHORT SELLING AND LEVERAGE

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SHORT SELLING AND LEVERAGE

In a certain sense, day trading isn’t risky at all. Day traders close out their positions overnight to minimize the possibility of something going wrong while the trader isn’t paying attention. Each trade is based on finding a small price change in the market over a short period of time, so it’s unlikely that anything is going to change dramatically. But here’s the thing: Trading this way leads to small returns. It’s hard to justify trading full time if you aren’t making a lot of money when you do it, no matter how low your risk is.
And, of course, some days, there aren’t many good trades to make. You can be looking for securities to go up, and they aren’t. Zero trades lead to zero risk, and zero return.
That’s why savvy traders think about other ways to make money on their trades, even if it involves taking on more risk. It’s that risk that generates the return that many traders crave. In this chapter, I cover two techniques for finding trades and increasing r…