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Short-selling enables traders to profit in a down market or protect existing investments. Find out how and why short-selling can become a key part of a balanced trading strategy.
|What is short-selling?||Advantages and limitations||Market participants||Ways to short sell|
|Short-selling explainedHow short-selling works||Why people short-sellHedging exampleLimitations||Short-sellersWho lends the stock to be sold?||Through a brokerCFDs|
When you short-sell, your broker will sell the asset for you and credit the proceeds to your account. When it comes to closing the trade, you’ll need to buy back the same quantity of the asset and return it to your broker.
If the price drops, you can buy back the asset at the lower price and pocket the difference. If the price of the asset rises, you’ll have to buy it back at the higher price and will make a loss.
Most of the time, you can hold a short position for as long as you want, although you’re likely to be charged interest for the time the asset is loaned to you. In some cases, however, the lender may decide that they want the asset you borrowed back.
The broker firm can't return what they don't have, so they will either have to provide the lender with an equal amount of the asset from their own inventory or you'll have to cover by returning yours. This is known as being called away.
By trading CFDs with us, you are opening a contract to exchange the difference in value of your chosen instrument between the time you open your trade and the time you close it. One of the key benefits of CFD trading is that you can easily go short, which enables you to profit from falling prices as well as rising.
To find out more, please visit our CFD trading section.
CFDs are a leveraged product and can result in losses that exceed your initial deposit.