How does short selling of stocks work?

Answer 1

Shorting a stock is the exact opposite of buying a stock and going "long". Instead of buying the stock in expectation that it will go up in price, you sell (or short) it first and hope that it will go down in price so you can buy it back at a lower priced in the future and pocket the difference.

Your broker will take care of the paperwork and find the buyers and sellers, you just have to hope that the stock will go down in price.
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Answer 2

You have to have a margin acct with a broker
You get the broker to sell stock you think will go down at a certain price. You have to have money (at least 50%) of the transaction cost, in your account. you pay interest on the money borrowed to buy the stock you sell. If the stock goes down, you buy it back and make a profit, minus the interest. If it goes up, you have to buy back the stock at a higher price and lose money and pay interest on the borrowing cost.
If the trade is against you, you might get a margin call, and have to put more money into your account, or the broker will sell the stock at a loss to you, without your say-so.

Answer 3

Shorting is for the very experienced only. If you think "X" stock is going down...... you sell it (without owning it). Then you buy it back when it's gone down. If it goes up the loss can be your entire account (or more). Some stocks are "shortable" because they can be borrowed easily to cover. Others are not. There are more complications then I've outlined here.

I've been trading for over 30 years & just recently started "shorting".... It's truly a scary game.

Answer 4

It is the "opposite"of buying stock (long).
Here's how it works, generally:
Open a margin account with a broker. When you order a short sale, you are borrowing your broker's stock, selling it with a promise to pay him back when you later buy the same stock to cover your short sale.(There's usually a fee associated with the borrowing.) Hopefully when you buy to cover you will buy it at a lower price than when you sold short.The difference is your profit.
Example: sell short at $30 on 4/1 and wait until the stock drops to $20 on 6/1 and buy to cover. The difference ($10) is your gain.
To make $$$ when you buy (long) you want to buy low and sell high.
When you sell short you want to sell short high and then buy to cover low.

Answer 5

You sell the stock first. Then, after
the market drops, you buy it back
at the cheaper price.
This is risky business. If you guess
wrong and the market heads up,
your shorts might be called in.
This will force you to buy at the
higher price, thus you lose money.

Answer 6

One of the best way is to buy QID, PSQ, DOG, DXD, SDS. If the market turns sour, buy these stocks and sell them when market starts going up again. That way you don't have to worry about shorting stocks. Check these out at http://finance.yahoo.com/q?s=qid