Instructions

Examine fundamentals. Look at the company’s financial statements and listen to their conference calls to get a sense of how the company earns its revenue and whether the business model is sustainable. Classic examples of fundamental shorts are newspaper companies and TV networks at the dawn of the digital age of online advertising. Also consider whether the company is likely to lose market share to competitors, as occurred in the microchip industry as fabrication became more standardized.

Graph technicals. Stock graphs are frequently used to determine when a stock has topped, or reached a level after which prices should decline. Many more technical indicators can be described here, but it is rewarding to learn at least a few basic ones, such as RSI, MACD and moving averages. More advanced techniques such as candlestick recognition and Elliott wave-counting require considerable practice and some training.

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