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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: sandintoes who wrote (7959)	4/19/2005 12:00:25 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 8752

It is not complicated, just counterintuitive. If you can trade long positions, then you can trade short positions. Everything is backwards in a short sale, but the principles are simple: 1. You borrow shares from your broker. You must pay the broker back, but he really doesn't care when---10 minutes, 10 months, 10 years, whatever. 2. The shares are immediately sold. Now there is cash in your account from the sale. 3. At some point in the future, you must purchase an equal number of shares to pay back the broker. He doesn't care how much you pay for them. He just wants his shares back. 4. If when you purchase these shares the market price is less than when you initially sold the borrowed shares, you profit. You reimburse your broker for his shares, and pocket the difference. So it is backwards. In a long trade, you buy first, hope it goes up, then sell. In a short trade, you borrow and immediately sell first, hope it goes down, then buy. (When you take a short position, the borrowing and selling are linked and immediate; you don't need to do both---borrow then sell---the borrowing generates an immediate sale at the market.) T