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How to Sell Short to make money in market?

Posted By On 2/21/2009 09:57:00 AM Under

1. One must understand that a great opportunity exists in making money by shorting the stocks; however remember that the strategy has more risk than buying the stocks to make money.

2. As a prelude to shorting the stock one must have a margin account with a broker or a brokerage house. One has to provide the margin money and it can be either cash or stocks, and the lending value depends on the terms and conditions of the brokerage house or a broker.

3. One has to find an opportunity in the market and can use the margin account to borrow shares of stocks from other accounts with the help of the broker and one enters into a short trade.

4. One makes money if price goes down as one is betting on the stock performing poorly. As soon prices go down considerably one enters into the stock and execute buy action and makes money by virtue of the price difference between buy and sell price.

5. One can make considerable money by shorting the stocks if the trend of the market is down or one shorts in a stock whose company has been hit by bad news or other developments that cause the stock to decrease in value.

6. Before venturing into this arena as a caution one must paper trad and than try short-selling on a very limited basis. It is better to see how the strategy works and thereafter one can trade professionally to make money by shorting the stocks.

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