If you are interested in making money on the stock market you might want to learn about shorting stocks. Many people believe the only way to make money on the stock market is if your stocks go up in price. But shorting stocks works the other way around. You’ll cash in if they drop in price.
If you are thinking of trying this tactic you should note that it’s worth gathering experience before you try it. Don’t make it the target of your first stock buy.
Part of the reason for this is that you will be borrowing stocks rather than actually buying them in order to make that profit. And you will be looking for a stock that drops in price to benefit from. If it goes up you won’t make your money, you will lose it instead.
To do this you must have a margin account in place first of all. If you don’t you won’t be able to short the stocks. Another thing you need to do is to make sure the broker you are using has the stocks you want to borrow in the first place. If they don’t you won’t be able to borrow them. It makes sense but you still need to check.
When it comes to learning how to make this work you must remember that you sell the stock before you buy it. This is what borrowing the stock is all about. You borrow it first, wait until the price goes down and then buy it back. And hopefully if you have got it right you will buy it at a lower price. This will mean you can profit from the difference between the two figures.
It is this borrowing aspect that confuses some people, and it is why you should only attempt it when you already have some experience in the stock market. You will find it easier to do online as well, so bear this in mind. If you have a margin account you should see the option to short sell somewhere on your screen.
The whole point of shorting stock is that you are gambling with something that does not belong to you. This idea doesn’t sit right with some people and it may be that you do not like this element of risk. At least if you own stocks that go down in value, you can hang onto them in the hope they will rise again. So be sure you know what shorting stocks is all about before you try it.