Short sell

Here is an example. Say you think that AAA is going to go down in value. So you want to short it. It's trading at 10 dollars. You borrow 100 shares of AAA from your broker (with a margin account with the ability to short). Now you have 1000 shares of AAA that at some point you will have to replace. AAA goes down to 8 dollars and you "buy to cover". So since you bought the shares at 8 dollars a piece, this cost you 800 dollars. So in essence you sold for 1000 what you bought at 800, but just in the reverse order of a normal trade. You made a 200 dollar profit, minus commissions and interest. However if AAA goes to 15 dollars you have lost 500 dollars (50%). If it goes to 20 dollars you have lost 1000 dollars (100%). If it got bought at 30 dollars, you have lost 200% overnight. It is pretty crazy to be able to lose more than you put in, but this is possible in shorting. And if a company gets bought, it can make you lose more than you put in literally overnight. So shorting is only to be done by people who know what they are doing. I suggest using short ETFs. They are funds that are traded like stocks, and the short ones have the same advantage of going up as the market goes down, but you cannot lose more than you originally put in.

short selling means selling shares not owned by you. But you have to buy them later before the day ends, either at a lower price (meaning you earned) or at a higher price (meaning you lost)

short selling is popular terms on commodity or stock trading. commodities: contract in which a trader has agreed to sell a commodity at a future date for a specific price. Stock: stock shares that an individual has sold sort (by delivery of borrowed certifies) and has not covered as of a particular date.

Short Selling is somewhat a strategy in stock trading wherein, a trader would SELL a particular stock without prior owning the stock. Make sense? well... This trading practice was commonly used when the market was said to be in a "BEARISH MARKET". The investors or traders in this kind of market, knowing that the market is performing not good, would anticipate that the prices of stocks would go down or the stock trend is in a "downtrend", there, they would practice the "short selling" & "buy to cover" orders.. instead of the usual "BUY" & "SELL". The idea behind this trading practice is that, a trader would execute a "Short Sell" order to his broker, that's the first step. To complete the trade, he will then "Buy to Cover" what he previously sold by purchasing the stock at his desired price, then there he would generate his profit. In recent news, The US Securities and Exchange Commission took what it called "Emergency Action" wherein the agency puts temporary halt from short selling 799 financial companies that threatens investors and capital markets. This report was released last September 19, 2008.