It's my party and I'll cry if I want to

It was all going so well: prices of continental Europe were falling. I had noticed this and  had opened a short position on the TR European Growth Trust (TRG). The price moved nicely into profit, and then had a pull-back, and I had moved my stop to break-even.

2014 12 16 TRG


You can see my entry point (blue arrow) and my stop loss (red line). This position is now what might be called a 'free trade' - ie I can't lose money on it because the stop is at break-even. The price is beginning to trend downwards again (which I want) so it makes sense to add to the position. I tried to add to the position yesterday only to find that the stock is no longer available to short. You may recall me mentioning this last week in my post about attempting to short some European ETFs.

I called up my trading platform to ask them about this. It seems that when I am opening a short trade with a CFD, the platform needs to hold the stock that I am shorting. If a stock is trending downwards and other traders are doing the same thing, then there is not enough stock available for the trading platforms to use as collateral, and so it becomes unavailable to short. They did offer to try and get hold of some of the stock as a 'special' but said that it would cost me 15% - 'forget it', I said.

So, it seems that when shorting, using CFDs, I have to come early to the party to be able to use the stock as collateral, as latecomers may not be admitted. This is interesting, because I have come across this situation a number of times when trying to short different stocks and investment trusts, notably FTSE 250 based stocks a few weeks ago. When I can't short something, it's possibly a sign that others are doing the same thing - it therefore validates my trade, and I may have to use another instrument to achieve the same thing - hence my short Netherlands trade the other day. I guess that once a trend has become established and is playing out, there may come a point where the big players are exiting their positions, and the stock therefore becomes available again. So then being able to open a short position may be a good reason not to: the trend may be coming to an end!

My understanding is that when going long, this is not a problem.

On the subject of re-opening positions, I have done this with Grainger, the UKs largest listed property landlord. You may recall me being short Grainger a few weeks ago. In the recent resurgence of the price I moved my stop-loss to breakeven so that I would not lose out on the trade if the price continued to rise. This resulted in my position closing and I was out of the trade for no loss. However, the share price has fallen back again and it now looks like it is trending downwards once again, so I have re-opened a short position:

2014 12 15 Grainger


Have a good week!


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