How to Short Stocks

The process of stock shorting begins with borrowing a lot of currency pair from a broker, and selling it. Usually, the currency pair is held by you until you get the desired profit point. To close the position, you buy back the lots of currency pair and then return the money to your broker. The left over proceeds are your profit.
If you want to make great benefits from shorting stocks, there are few conditions you have to consider.

Difficulty: Easy

Instructions

1. Appraise the market trends in general. It's not advisable to short stocks when the market is in uptrend, no matter the bearish sentiments of the stock. Take sides with the market, not against it

2. Go for companies that has with weak fundamentals. Companies with sales decline, profits or margins, companies losing its market shares, in legal battle, or anything that makes its future outlook quite sluggish.

3. Some companies to look after are those trying to break certain resistance levels in business. This could be double top, triple top, lower trend lines 50-day moving average, 200-day moving average. That failed attempt shows a large amount of energy that'll push the stock lower.

4. Do not enter when the stock price is already down for a few days in a row. It is also not advisable to do so when the stock gaps down after prolonged downtrend. Wait for the stock to rebound and show its strength. If it fails and turns back down, it then becomes safer to enter.

Tips & Warnings

• This however doesn't mean you will always make money. Stock trading basically is a business which involves risks like every other. If the price of the stock rises against your expectations and you have to buy it at a higher price than the one you sold at. The loss may definitely be paid from your pocket.

[SimplyCuttings]

on 1/14/2009 I always wanted to day trade, but this stuff is waaaay over my head. Great article though.