11-02-2012, 10:35 AM
with a short you are borrowing somebody elses shares.
so you borrow them, sell them, then later buy the shares back from the market and deliver them back to the owner. (hopefully at lower price than what you originally sold them for.)
like Dave said you do need a margin account which is an extra form to fill out, and you pay a small amount of interest per day to the brokerage for borrowing the shares. I dont personally think its a good idea to hold a short for an extended amount of time.
personally, I like options (or option spreads) a lot better. try buying a single put contract (covers 100 shares) at a lower strike price. if it goes against you, you do lose all of the money you spent on the contract, but contract cost is of course a lot less than 100 shares cost. if it goes your way, your profit is amplified x100.
so always set buy and sell stops, and be realistic with your profit target.
just remember, other traders are smart, so the market may have already "priced in" the news/event that you are talking about!
so you borrow them, sell them, then later buy the shares back from the market and deliver them back to the owner. (hopefully at lower price than what you originally sold them for.)
like Dave said you do need a margin account which is an extra form to fill out, and you pay a small amount of interest per day to the brokerage for borrowing the shares. I dont personally think its a good idea to hold a short for an extended amount of time.
personally, I like options (or option spreads) a lot better. try buying a single put contract (covers 100 shares) at a lower strike price. if it goes against you, you do lose all of the money you spent on the contract, but contract cost is of course a lot less than 100 shares cost. if it goes your way, your profit is amplified x100.
so always set buy and sell stops, and be realistic with your profit target.
just remember, other traders are smart, so the market may have already "priced in" the news/event that you are talking about!