Retail traders love to sell short. I’m not sure what the appeal is but I’m going to urge you not to do it. I’ve been doing this for a long time and I can tell you that there are only 3 people who ever make any long term gains selling short. One is the professional short sellers. They have big research departments and they make money by finding sick companies that are on their way to bankruptcy.

The second group of traders that make money selling short are the big banks and huge hedge funds that can manipulate price. They know when price is going to start down, and they know when to take profits because they are the ones that initiate the sell off, and they know where they are going to cover.

The third type of trader that makes money on the short side are just lucky. How consistent do you think those guys are?

Folks here are the simple facts. Markets go down differently than they go up, and the mathematics on the short side are against you. You simply can’t make that much money selling short because the maximum winning trade is only 100%.

This holds for bear markets as well as bull markets. As a matter of fact I would suggest it may even be harder to make money selling short in a bear market than it is in a bull market because the counter trend moves are more violent, and more likely to knock you out of your short for a loss.

Like I said, markets go down differently than they go up. A strong trending up is not that unusual so trend followers on the long side often make money. However, a strong trending move down like we had in oil last year is an anomaly that is pretty rare. Let me show you what most bear markets look like.

After the initial crash that took gold down to $1180 it then took 2 1/2 years for gold to lose another $140. I watched as bears lost money on trade after trade after trade trying to short this market. The simple fact is the only way to make money in the typical run of the mill bear market is you have to correctly anticipate where each bear market rally will top, and where each leg down will end. I can tell you that in all of my years trading markets I have never yet seen anyone call bear market tops with any consistency.