Insights, strategies, and guides to help you trade smarter.
A short position is created when a trader sells a security they do not own, typically after arranging to borrow the shares needed for delivery. The borrowed shares allow the trader to sell first and potentially buy them back later at a lower price. The process involves more than simply selling a stock, because the borrowed security remains part of the transaction until the short is closed.
A trade can make money for the wrong reasons or lose money despite following a sound process. That is why traders need to Analyze Winning and Losing Trades separately instead of judging every position only by its final profit or loss. Looking at each outcome on its own can reveal different patterns in execution, timing, market conditions, and decision-making.
To Analyze Trading Performance effectively, traders need to look beyond total profit or the number of winning trades. The amount of time a position remains open can reveal important patterns about how a strategy behaves. A setup may produce strong results during short holding periods but perform poorly when trades are kept open longer.
Trading results can look very different depending on the period being measured. A strategy may produce strong returns over one month but show weaker performance over a full year because market conditions, volatility, trade frequency, and risk exposure change over time. Looking at only one period can therefore create an incomplete picture of how a strategy has actually performed.
Slippage in trading occurs when an order is executed at a different price than the one a trader expected. It can happen when markets move quickly, available liquidity is limited, or there are not enough orders at the requested price. Even a small difference between the expected and executed price can affect a trade's risk and return, especially for active traders placing frequent orders.
Divergence indicator is used by traders as a tool which helps them to evaluate the relation between price and momentum in order to discover scenarios where the market is becoming weaker. Unlike trend following, divergence trading uses both price action and momentum to see the contradiction between them.