How to Short Sell a Stock

How to Sell Short in the Stock Market? This is just like selling a stock that you do not own. Because you don't own the stock, you need to borrow it from your stockbroker and then sell it to someone else, later you will have to buy it back and return the stock to your broker.

Short selling is a technique used by stock traders to take advantage of market declines and to profit from the falling price of a stock.

To sell a stock short, you need to have a margin account at a brokerage company. In order to open a margin account, you must have sufficient prior investment experience and satisfy the firm's requirements for margin transactions.

In a margin account, you are investing with your broker's money. In other words, you borrow shares of stocks from other accounts and sell them. You can profit form shorting a stock if the share prices continue to decline after you enter the trade. The reason is that if the price of the shares goes down after the short-selling, you buy the shares again at a lower price and return them to the accounts you borrowed from. However, you must be aware of the risks of shorting a stock. If the price of the stock goes up, you will be forced to purchase the stock again at a higher price and pay your broker the difference, which means you will lose your money.