| First off, before you learn the secrets to successful | | | | short selling. In a bull market, 3 out of 4 stocks go up |
| short selling of stocks, you must understand that | | | | in value. That means you already have a 75% chance |
| selling short stocks comes with a much greater risk | | | | of losing money. If the overall market is headed |
| level than regular stock investing. Normally there are | | | | downward, you have a much better shot at making |
| very simple precautions that you can take when | | | | money. |
| buying and selling stocks for profit. It is possible for | | | | Secondly, look for changes in the company that could |
| you to literally lose your entire investment in a short | | | | trigger a downward trend in the overall price. A lower |
| period of time when investing for the purposes of | | | | than expected earnings report can result in |
| short selling stocks. Short selling should only be | | | | downtrend in stock price. In particular slowdowns in |
| engaged in by seasoned investors. | | | | financial numbers are huge signs of a potential |
| So how does short selling work exactly? Well | | | | decrease in price. |
| normally you make money on a stock when you | | | | Third, there are certain chart patterns that indicate |
| purchase the stock at one price and sell the stock at | | | | possible sale declines. For instance, if you are familiar |
| a price higher than what you originally purchased it. | | | | with the cup with handle chart pattern, you know |
| The difference in prices is your profit. With short | | | | that this is a common technical chart signal that |
| selling it is the opposite. You sell the stock first at | | | | indicates a potential rise in stock price. The opposite |
| one price by borrowing shares to sell from your | | | | of this pattern, known as the inverted cup with |
| broker. You then buy the stock at a lower price so | | | | handle or the head and shoulders pattern is a signal |
| you can give the broker back his or her shares. If | | | | of a potential decrease in stock price. Many of the |
| you buy the stock at a lower price, the difference | | | | stocks that have made substantial decrease in prices |
| between the higher price you sold at and the lower | | | | have shown this pattern. Another chart pattern of a |
| price you brought at is your profit. | | | | potentially declining stock is when the chart makes a |
| So how do you successfully short sell stocks? The | | | | pattern that looks like the letter M. When the price |
| first thing you want to do is make sure the market is | | | | breaks below the previous bottom at the end of the |
| in an overall decline before considering engaging in | | | | M is the time to short. |