Short selling means that when the price of a certain stock falls, stock investors borrow the stock from the broker and sell it. Before actual delivery, they will replenish the sold stock. , a speculative behavior that only settles the price difference. If the stock price does fall in the future, the stock will be purchased from a lower price and returned to the broker, thus earning the price difference.

Short selling is also called short/short selling, which is selling high and covering low.

There are three main sources of stocks sold by short sellers during short selling:

The first is their own brokers, the second is trust companies, and the third is financial institutions. .

For those who lend stocks, lending stocks to short sellers is very beneficial because it not only provides customers with comprehensive and thoughtful services, but also increases the value of the stocks. Regardless of whether the lending of stocks is conditional on collecting interest or on the appreciation of stock prices, it is a kind of income for the lender. At the same time, lenders often take steps to protect themselves by depositing the price charged by short sellers into broker accounts. [Edit this paragraph] Short selling includes two forms. One is that the short seller sells the stock at the current market price and makes up for it when the stock falls, thereby earning a profit from the price difference;

The other is that the seller Now it is unwilling to deliver the stocks it owns and sells the stocks in the form of short selling to prevent the stock price from falling and thus play the role of preserving value. If the stock price does fall by then, he can replenish the stock at a lower market price. In this way, the profit from short selling will offset the loss from owning the stock, regardless of the cost, so that losses can be avoided. [Edit this paragraph] Classification of short selling According to the different purposes of short sellers, short selling can be divided into three categories:

The first is speculative short selling. In this case, the purpose of the short seller selling the stock is to expect the price of the stock to fall, and then replenish the same stock at a lower price when it expires. The difference between the two prices is the short seller's profit from the short sale. This kind of short selling is highly speculative, risky and profitable. Speculative short selling has a greater impact on the stock market, because when short sellers sell stocks, the supply of stocks will increase, and the price of the stock will decrease; when making up for the stock, the demand for the stock market will increase, and the price will also increase. rise.

The second is short selling for hedging. The fundamental purpose of this short selling is to avoid losses caused by a drop in the market price of the stock.

The third is technical short selling. This kind of short-selling behavior is divided into three situations: the first is short-selling based on all one's own stocks, which includes situations such as tax purposes, value preservation purposes, and expected delivery purposes; the second type is short selling based on all one's own stocks. It is short selling for the purpose of arbitrage, and it also has arbitrage in different markets and arbitrage at different times; the third type is short selling operated by brokers or securities dealers, which include not only professional members, securities dealers, but also investment banks and other financial institutions. mechanism.

Because short selling is highly speculative and has a greater impact on the stock market, and the behavior of short sellers is obviously speculative, the laws of various countries have more detailed regulations on short selling to try to To reduce the adverse effects of short selling, short selling of stocks is prohibited by law in some countries. [Edit this paragraph] Ten principles of short selling 1. Short selling is not a must.

First of all, as an investor, you do not have to do short selling. Most investors focus on the long side, while far fewer focus on the short side. There are only a few investments that are good at both long and short positions. It's a bit like a player in a baseball game who can hit with both hands. Only a few players can do this, like MICKEY MANTEL, but there are still strengths and weaknesses on the left and right. Whether you want to make long and short investments at the same time is your personal choice.

2. The stock market is more likely to rise than to fall.

After stocks rise, they fall back due to different reasons. There will be adjustments in the stock market, bear markets, big crashes, etc., but the stock market itself often reflects the technology, civilization and development of the society. The entire development trend of mankind is to move forward. This is a historical law that no one can stop. The Dow Jones Industrial Average started at fifty points a hundred years ago. After the Great Crash of 1929, the Great Depression, World War I and World War II, high inflation in the 1980s, the September 11 terrorist attacks, etc., the index remains Rising to 10,000 points. Looking at the stock market as a whole, the success rate of short positions is lower than that of long positions.

3. The stock decline is caused by its own reasons rather than selling.

A sell-off (a rapid decline in a stock accompanied by huge trading volume) often signals the arrival of a bottom. Just like when a stock makes a head start, a large reversal can cause the stock to change from an upward trend to a downward trend. Throughout the middle stages of a downtrend, stock declines are often accompanied by shrinking trading volume.

4. Avoid short squeezes.

Short selling can only be regarded as a short-term behavior and cannot be a long-term battle. The most short investors can do is take one step forward. When they find that short positions increase, they immediately buy back stocks to cover the shortfall. Because short selling is when investors borrow stocks to sell, if there are too many short positions, that is, many investors borrow stocks to sell short, once the stock market reverses, everyone will enter the market to cover their positions, or the borrower will ask the short seller to cover their positions, and the supply and demand relationship will suddenly change significantly. Changes, stock prices rose rapidly. Short investors are under buying pressure and have to buy back the stock at a high price, which is called a short squeeze.

5. Gravity also applies to stocks.

As a short investor, you should be more aware and vigilant than a long investor, because the rate of decline of stocks far exceeds the rate of their rise, just like the attraction of the earth to stones, but time often Relatively short.

6. Borrowability and rising stock price rules increase the difficulty of short investment.

Short selling is also called short selling, and the seller is also borrowing. The first step in short selling is that the brokerage is willing to lend the stock to the investor, so the completion time of a short order is often longer than that of a buy order. The exchange has a "report up" rule for short selling, that is, when the stock is falling all the way, investors cannot sell short, and must wait until the next rise (report up) before they can place a short order. However, ETFs are not subject to this condition. Therefore, short selling often does not get a good price.

7. Establish a short position when encountering a slight rebound in a confirmed downward trend.

Because of the above conditions, generally speaking, a small rebound in an established downward trend is the best opportunity to establish a short head. It is very dangerous to attempt to sell short when the stock is strong, especially when the stock reaches a new high, which is commonly known as "beating the tiger's head".

8. Use previous experience.

For short investors, one advantage is that they can make full use of the stock's trading history to analyze the stock's nature. Because short selling must be carried out within the previous stock price range, reasonable targets can be selected by analyzing previous highs, bottoms, important moving averages and trend lines.

9. Shorts are best covered in a weak market.

The stock market tends to rebound quickly during a decline, so investors should take advantage of the weakness to buy back for profit and not wait until the stock market reverses to cover their positions.

10. Avoid stocks with high dividends.

Try to avoid short selling stocks with high dividends, because short sellers are required to pay dividends to the lender.