Never short based on price action. A stock that is going straight up can continue at least until you are bankrupt before falling to the ground. - Never short based on valuation. A stock might be expensive at 100 times earnings and it will be even more expensive at 200 times earnings.
- Unless you are hedging, your short positions should be 1/3 the size of your long positions.
- Believe it or not, short stocks that have high short interest. In general, short squeezes are a myth and stocks that have high short interest are usually shorted for a reason.
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Never short based on price action. A stock that is going straight up can continue at least until you are bankrupt before falling to the ground.