I found that is not true and here is why
When you short, you can lose more than your capital
Imagine you short a stock at $50 and it goes to $0. Your gain is $50 or 100% gain. This is the maximum gain you can get. On the other hand, if the price continues to go up to $100, or $200, or $300… You can lose more than your capital with 200% or 400% or higher – the sky is the limit! And this is without any leverage. It is definitely not a position you want to be in.
Yes. Of course you can put a stop loss to it. In fact, you MUST always have a stop loss when you short anything.
On the long side, you buy a stock at $50, the maximum loss you can potentially realised is 100% of the $50 you invested. If it goes to $200, you can enjoy 400% gain.
This asymmetry in profit/loss profile is depicted on the chart below.
