The long and the short of it

What I've always liked about this strategy (which was pretty successful, by the way) is that it placed more emphasis on human psychology than it did on statistics or analysts' reports. But he didn't carry it out as far as he could have: if he really believed in the predictive value of his method, I always argued, he should have taken out a short position on the companies that didn't meet his criterion as well as a long position on those that did.By 'short' and 'long' I am referring to a common jargon used in the financial industry. A long position in a security, such as a stock or a bond means the holder of the position owns the security and will profit if the price of the security goes up. This is the normal expectation most people have when they invest, and it's what my friend would do with companies that met his 70% benchmark.In contrast, a short position (also known as shorting or going short) is the practice of selling securities that have been borrowed from a third party (usually a broker) with the intention of buying the identical assets back at a later date to return to the lender - the reverse of the normal trading practice. In this case, the holder of the security is betting that its value will go down between the time of the sale of the borrowed stock and its repurchase later. If the value does drop as expected, the seller will pay less to buy the assets than the seller received on selling them, and will therefore make a profit. Of course, the short seller will incur a loss if the price of the assets rises. Here's an example of how this works: if shares in BioMed Central currently trade at $10 per share, a short seller can borrow 100 shares of BioMed Central from a broker and immediately sell them for a total of $1,000. If the price of the shares drops to $8 per share, the short seller can then buy 100 shares back for $800, return the shares to the broker and keep the $200 profit (minus any borrowing fees).Before you all rush out to take a short position