How to Make Money in a Down Market

Short selling is a technique that many stockmore about it and try it on your own it will start to
brokerages allow. It allows you to Sell High then Buymake sense. It is used successfully every day by
Low, which is the opposite order of the traditionalthousands of traders. It is somewhat controversial,
Buy Low, Sell High technique.however. In fact, the SEC considered banning it for a
First, you will need to apply for a margin accountwhile. But after they made better regulations on it,
with your trading brokerage. Having margin gives youthey decided to continue allowing it because it is a
the ability to buy more stock than the cash youhealthy part of the market. When prices are
have available by borrowing money from yourdropping, who is going to buy the shares from people
brokerage. This is also called leverage because itneeding to get rid of them? Short sellers, along with
allows you to do more with the money you have. Alltraders looking for bargain prices.
brokerages require a margin account to do shortCaution: Before you try it this technique, keep in mind
selling.that you will be "swimming against the current," so to
Second, you need to find a stock that you believespeak. The market in general has a tendency to go
will be dropping in price soon. However, not all stocksup about ten percent every year. You will be betting
are available for shorting due to supply limitations orthat the company is going down in value, which is the
other restrictions. When you go to short sell thisopposite intent of most companies! The owners and
company, your brokerage will let you know if it ismanagers will be trying to turn the company around
available to short on their system. The brokerageevery day, so do not hold your shorted position for
needs to have those shares available to lend to youlong! You should also practice this technique with an
before you can sell them.online stock market game to get the hang of it.
This concept may sound strange, but after you read