Short selling, what is it? Why would a person do it?

When you’re bullish (think prices will rise) on the market or a stock, you go long (buy and hold, one day sell). When you’re bearish (think prices will fall), you go short, (sell and hold, one day buy). People often think you can only ‘buy and sell’ shares, well, you can also ‘sell then buy’ and that basically describes what happens when you ‘short’ a stock, often people think ‘short selling’ means you don’t hold the stock for long, as in ‘I bought Lloyds at 65p and sold the next day for 70p’, in that case you just didn’t ‘go long’, trading rapidly is not what short selling is, or is about (I only say this because it’s a thing I have been asked a few times).

Today we will take a look at how ‘short selling’ works.

1. In order to ‘short’ a stock you sell it first then buy it later. You do this in the belief that prices will go down, you’re hoping to …

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