Short-selling explained

Short-selling is the practice of selling an asset that you don’t actually own, in the hope that the price will decline and you can buy it back in the future at a lower level. You can then keep the difference between the price at which you sold the assets and the lower price you paid to buy them back.

At IG, you can short-sell CFDs just as easily as you can buy them. When opening a trade, you simply click 'sell' instead of 'buy' to back a market to fall.

To find out more about placing a trade using our CFD platform, please visit our trading CFDs with IG module.

How short-selling works

When taking a short position in shares, for example, the shares are borrowed from a third party – usually a broker – and then sold. The borrowing isn’t something the short seller will need to worry about though – it happens ‘behind the scenes’ when they request to short-sell.

Take a look at the two trade examples below – one making a profit, one making a loss – to further understand how short-selling works.

Profit-making trade

Let’s say that Macquarie is currently trading at A$21.24 per share. You decide to short-sell 1000 shares of Macquarie for a total of A$21,240.

Loss-making trade

Let’s say that Vodafone is trading in the market at £1.50. You decide to short-sell 2000 Vodafone shares for £3000 (2000 shares x £1.50 per share).