idid said: I sell short when I know the stock will fall. And I try to insure there is at least a dollar on the down side that is still. pertty much a done deal. I will not short sale a stock that I am have not traded or watched very closely for several months. You can make money selling short, but you can lose it to. If the stock goes up, after you have sold short, you may have to buy back the stock at a higher price. Its like anything else. You must study and set your own limits on when to get out of the sale. If the stock goes up or down, you need to have your exit points set. I have a margin account, but as yet have not used it. I try to use my own money and not borrow from the "house".

idid said: I just eyeball the stock, and use the charts. For example, stock A earnings are due out and stock A trades in a range of 3 to 7 dollars a share, on average. A few days or a week before earnings are to come out, stock A goes up from 5 to 11 dollars. Using the charts, we see that stock A at 11 dollars is a new high for the year. I will sell that stock short at 11, and buy to cover at 7 or maybe 8 after the earnings reports and the stock starts to fall to normal levels.

Real world example would be DRYS. Check the chart and you see a sharp run up from 4/27 till 5/7. Earnings came out after hours on 5/6. I sold short 200 shares at $10.00 on 5/7. Only after watching the stock fall some. I bought to cover at just over $6.00. I could have heald out longer, but I dont like holding short for very long.

Like I said, I dont short stocks I have not watched and pertty much know how they act. One day I look to get fooled tho. Always the chance your selling at the new low. I dont know of any formula you can use to predict a direction, a bottom or a high. If I have a nagging feeling, I dont sell short. I miss alot of action that way, but dont take it in the shorts near as much.