How to Place a Short Sell
You don't need to rely on a bull market to make money with stocks. You can employ several strategies that provide profits when the market, or a particular stock, declines in value. Shorting a stock is a risky approach in which you essentially are betting that the stock will go down. To sell a stock short, you don't have to leave the section of your online brokerage account where you buy or sell stocks.
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Instructions
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Navigate to the section of your brokerage account where you trade stocks. Determine the ticker symbol for the stock you would like to short. You can use the "symbol lookup" feature available on most pages, including the trading page, at your brokerage's website.
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Enter the ticker symbol and the number of shares you would like to sell short. Select "Sell short" from the menu, which generally includes "Buy," "Sell" and "Sell short" options. You also have the option of setting a limit price, which represents the lowest price at which you are willing to open your position. You also can place a stop-loss on the order, which automatically sets a price at which you will close your position if the stock you are shorting rises. This move protects you against significant losses.
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Choose the timing of the order. Typically, you ask your brokerage either to cancel the order if it cannot fill it that day or to keep it open until it can fill it. Submit the order. Once executed, your brokerage credits your account. For instance, if you sell short 100 shares of ABC, Inc. at $10 per share, your broker credits your account $1,000.
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Tips & Warnings
Alternatively, you can call a broker to execute short sell a stock, just as you can to buy or sell a security by phone. This process, however, tends to cost significantly more than making the trade online on your own.
When you close, or cover, your short position, you buy the stock back. If you buy it back at a lower price, you earn a profit. For example, using the above-mentioned example, if the stock drops to $8, you realize a $200 profit, minus trading commissions, because you return the shares at a total value of $800.
If the stock you shorted rises to $12, you have lost, at least on paper, $200. For this reason, you generally need to have a margin account to enable short selling. If losses accumulate, you might receive a margin call from your brokerage, which requires you to deposit cash or sell other positions in your account to increase your balance to your brokerage's required minimum.
