By
eHow Personal Finance Editor
Difficulty: Moderately challenging
Things You’ll Need:
Step1
Set up a margin account at a brokerage house. You need to put up collateral, such as cash or stocks, and the brokerage house will lend you up to 50 percent of their value.
Step2
Use the margin account to borrow shares of stocks from other accounts with your broker's help. You then sell them. If the price of the shares goes down, you buy the shares again at the lower price, return them to the accounts you borrowed from, and keep the difference. That's the practical definition of "shorting a stock."
Step3
Know the sorts of conditions that work. Selling short can be an effective strategy if the market as a whole is dropping. It can also be useful with a stock whose company has been hit by bad news or other developments that cause the stock to decrease in value.
Step4
Try short-selling on a very limited basis. You'll get a feel for how it works--and how it can hurt.