Profiting from Selling Stocks Short

Profiting from Selling Stocks ShortYou might be thinking the Stock market is extended or likely to fall. Possibly there is a particular stock that you think is over extended. You might be thinking now might be a great time to go short the stock market. You might think to yourself how easy it was in 2008 or even in 2000 to have gone short and made a fortune. The fact is if you had shorted the Nasdaq in 1998 or 1999 you could have gone broke even though you were right a couple of years...
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Profiting from Selling Stocks ShortYou might be thinking the Stock market is extended or likely to fall. Possibly there is a particular stock that you think is over extended. You might be thinking now might be a great time to go short the stock market. You might think to yourself how easy it was in 2008 or even in 2000 to have gone short and made a fortune. The fact is if you had shorted the Nasdaq in 1998 or 1999 you could have gone broke even though you were right a couple of years later. Short Selling is Never Easy and is fraught with numerous risks! My goal is not to sugar coat anything and tell you how easy it is and you will get rich tomorrow. My goal is to share with you my experiences and to try to prevent you from some of the inherent pitfalls of short selling. I want to point out there is a time to sell short and it is not evil or wrong. However there is always more profit to the upside and buying strong stocks in a bull market. Again....Yes it is possible to profit from selling stocks shorts however short selling entails much greater risks and is only appropriate at certain times. Basically short selling is the antithesis of simply buying stocks. Instead of taking ownership (owning a share of a business you sell them (borrow stock) with the anticipation they will fall further. When you short sell a stock, your broker will lend it to you. The stock originates from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Eventually, you must "close" the short by buying back the same number of shares. However short selling is a much more aggressive & riskier approach than simply buying shares. Due to this additional risk due to volatility a complete trading plan is needed. I want to point out in the loudest of terms: shorting is risky. Shorts have a floor and limited profit potential. Over the long run, most stocks appreciate in price. They cannot fall lower than zero. Longs have an unlimited profit potential. There is no ceiling on longs. In the US stock markets there has been an upward bias even with the extremely tough bear markets throughout the decades.You need to be aware that interest is charged on margin accounts, so keeping a short sale open for a long time will cost you money. As well as you will be liable for dividends. These added costs add up and affect the profitability of your account.