What is Short Selling?
Short Selling is a trading strategy where you bet on a stock decreasing in price. You borrow the stock from your broker and immediately sell. When the stock drops (as you are hoping) you then buy back the stock for a profit or loss (buying to cover).
Shorting can be a very profitable strategy if you know what you're doing, but can also be dangerous.
Stocks can explode quickly against you and keep going up for no particular reason.
Technically a short can go against you infinitely (of course this never actually happens). Although some small cap stocks like biotech are known for running over 100%.
PROS:
You can make money in a down market whiles bulls are stuck.
You can still make money if missing the upward move.
Stocks often times get over-extended on news and can pullback significantly.
You can use shorting to hedge and protect a long position.
CONS:
Stocks can move against you greatly (especially smaller cap)
You must be on a margin account.
You can be targeted for short squeeze.
Many on Wall Street have a negative attitude towards it.
Shorting can be a very profitable strategy if you know what you're doing, but can also be dangerous.
Stocks can explode quickly against you and keep going up for no particular reason.
Technically a short can go against you infinitely (of course this never actually happens). Although some small cap stocks like biotech are known for running over 100%.
PROS:
You can make money in a down market whiles bulls are stuck.
You can still make money if missing the upward move.
Stocks often times get over-extended on news and can pullback significantly.
You can use shorting to hedge and protect a long position.
CONS:
Stocks can move against you greatly (especially smaller cap)
You must be on a margin account.
You can be targeted for short squeeze.
Many on Wall Street have a negative attitude towards it.