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Opey,
You seem to have it right. If you're fairly new, though, I suggest you might not want to be shorting anything. Pretty dangerous, risky, and your potential loss is somewhat unlimited.
Some people short the market or a stock with a position held for days, weeks, or months. But they are very experienced and understand the unusual risk they're taking on.
Others, daytraders, short a stock for a matter of minutes intra-day only and can make good money, but you have to know a lot about what you're doing and how to do it.
Basically, it's the opposite of buying and selling. In this case, you sell the stock first, then buy it back later to close out your position, hopefully buying at a lower price than you sold it for, making a profit. If your position is opened (short sell) and closed (buy to cover) intraday, your online broker probably charges you no interest on the money you "borrowed" to get the stock you sold (before you owned it). If you keep the short position overnight or longer, you'll probably pay interest at a nominal rate for the value of it, another cost factor to consider. Also, to short, you must be using a margin account (approved for margin), not an IRA type account.
Other than that, it's all pretty much automatic, assuming your account is approved in advance, and assuming your broker has the stock in inventory (depends on your broker's clearing firm). To do a deal, you merely enter an order to short sell (or sell) the stock. The proceeds are credited to your account and offset by the debt you incurred. You have no profit or loss yet. Later, at some point, you enter an order to buy-to-cover (or buy) and your position is closed automatically, you have now made a profit or loss depending on the prices you got. This is the exact opposite of a normal, traditional LONG trade, it's a SHORT position.
The stock must be "shortable", i.e., over $5 in value, not an IPO in first thirty days, stuff like that, must also be in your broker's inventory (available - stock and quantity of shares you wish to short sell). There's a lot to consider and do, and your timing must be instantaneous, your instincts and executions must be perfect. As you can see, not a thing for someone to do early on in a trading career.
I would avoid shorting unless you have an online broker and instant executions, good knowledge of the market and trading, and a specific, valid reason for shorting the stock. Otherwise, you can lose pretty big. Not good.
Bill
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