Investing in stock market is not simple. Market will change dramatically and it requires lot of effort and concentration to make best use of the opportunities that are on offer. Many traders use different trading strategies to get good profits. Short selling is one of those strategies. Short selling is technique used by traders to make profits from falling prices of stocks. As an investor you should know that stock market is not constant at all. Lot of changes happen in matter of minutes. Short selling is the technique that help you make profits despite falling prices of stocks. Short selling technique is very much risky. It requires lot of effort and precise decision making. Read on to know facts about short selling.
In short selling individual should have great analytical skills that will help them make precise decisions and counter stocks that are going down. Go on and know how short selling works.
Lets consider you want to short sell stocks and you are expecting these to shares to go down. You ask your broker to get some 100 shares promising them to return it back after some time. You need to short sell these stocks immediately and hope that the price of that particular stock goes down further. Once the price goes down you can buy it back. Here you can make profits by buying back the sold stocks. The difference between sold price and buying price is your profits.
There is huge amount of risk associated with short selling. You can hope that stock prices to go down so that you can make profits by buying back those shares. If reverse happens and stock prices increase than you will lose hell lot of money. You won’t be able to tolerate your losses as they would be unlimited.
Advantages of Short selling
- Stocks tend to fall fast once the news have it affect on stock prices. So it will give lot of opportunities for short selling.
Above are some of the facts about short selling. If you want to make profits by short selling make sure you have precise timing to take spontaneous actions and book profits.