Learning how to short sell stocks is an advantage to making money in the markets. There are a few ways to do it and most only try to short sell using the shares of a stock. There are a few issues with this that we discuss in the video below but here are a few major ones:
1. It requires a lot of margin
2. The risk if the stock price goes against you is HIGH
Unlike buy-and-hold investors, traders often try to participate in the market’s downs as well as its ups. Some traders even seek out stocks that appear poised for a decline and then attempt to profit from them. This strategy is called “short selling.” It is achieved by selling borrowed stock at today’s share price, purchasing the shares in the future when, as hoped, its price dips and pocketing the difference.
If the stock declines as expected, the trader will come out ahead. But if the stock rises instead, the trader could suffer significant losses.
The image below is a great scenario.
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