Short Selling – Short Sell Stock

Short selling or selling stock short is the sale of a security which is not owned by the seller.  A short seller borrows stock through a broker so as to sell it on the open market first, with the promise of replacing the stock shares later.  The short seller hopes to profit from a decline in prices, so he sells the stock short in hopes of buying it back cheaper at a later time.  Short selling is the opposite of going long or buying stock.

Short selling is a common trading method due to the belief that stocks fall faster than they often rise.  Short selling allows a trader to profit in a declining market, rather than waiting to buy stock under strong market conditions.  Short selling is generally done in a weak market or in a downtrending stock as a stock breaks support, causing prices to fall.

Return to the main chart patterns page to learn more trading terms.