Community Forex Questions
How does short selling work?
Short sellers are traders who bet on a potential decrease in the price of a stock using a short selling strategy.
In shorting a stock, you borrow the stock you want to sell at a market interest rate and then sell the borrowed stock to profit from a future market decline.
By selling the borrowed stock at a higher price and then repurchasing it at a lower price if the stock price declines, you earn money. The profit is calculated by taking the difference between the price where the trader sold the stock and the price at which they bought it again, minus any borrowing and transaction costs.
In addition, you may lose a lot of money if the market rises rather than falls as you anticipated when you opened the trade. If a substantial short position develops in a stock and strong buying interest appears later, this may result in a "short squeeze."
In shorting a stock, you borrow the stock you want to sell at a market interest rate and then sell the borrowed stock to profit from a future market decline.
By selling the borrowed stock at a higher price and then repurchasing it at a lower price if the stock price declines, you earn money. The profit is calculated by taking the difference between the price where the trader sold the stock and the price at which they bought it again, minus any borrowing and transaction costs.
In addition, you may lose a lot of money if the market rises rather than falls as you anticipated when you opened the trade. If a substantial short position develops in a stock and strong buying interest appears later, this may result in a "short squeeze."
Jan 21, 2022 12:22