Short selling is an operation mode of stock and futures market, which means selling stocks at this price when the market is expected to fall in the future and buying them after the market falls to make a profit. Short selling is the opposite of long selling. Theoretically, it is to borrow goods to sell first and then buy them back. In fact, it is a bit like the credit transaction model in business.

This model can profit in the wave band of falling prices, that is, first borrow goods at a high level and sell them, and then buy them back after falling, so that buyers are still at a low level and sellers are still at a high level, but the operation procedures are reversed.

Common functions of shorting include speculation, financing and hedging. Speculation refers to obtaining the difference profit; Financing is a way to borrow money; Hedging refers to reducing risk exposure by shorting risky assets when the risk of assets in hand is high.

Second, the risk of shorting.

1, high investment risk

Short trading has the effect of financial leverage amplification, which may not only gain more benefits, but also suffer more losses.

2. Increased costs

In the process of guest trading, in addition to the basic transaction costs such as handling fees and stamp duty, it is also necessary to pay interest and other related expenses to the intermediary company.

3. Risk of compulsory liquidation

If investors can't pay off their debts on time, touch the liquidation line, can't add collateral as agreed, or under other special circumstances, they will face the risk of being forced to liquidate their positions.

Third, the main points that should be paid attention to when shorting

1, have the ability to judge the overall market trend.

Shorting only applies when the market is in a downtrend channel. At other times, such as the market is in a horizontal consolidation stage or a bull market stage, this operation skill cannot be adopted. Therefore, investors are required to recognize the general direction of future trends.

2. Grasp the rhythm of stock price operation, sell when the stock price rebounds, and buy when the stock price plummets.

On the way down in a weak market, there will often be a short-term rebound and a diving plunge. Investors should make full use of this irrational change opportunity in the market and make maximum use of the price difference opportunity created by the wide fluctuation of stock prices to obtain profits.