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A short sale is an interesting move to consider. This is where you will sell shares that you borrow at a given time and then buy them back when the market falls. This means that you will potentially make a profit.
You have to pay a commission for a short-trade. Suppose you borrowed some shares at $50 each. You could sell those shares and then have the right to buy them back after a set period of time. The results will vary based on how the stock moves. If the stock gets to $80 after a certain period, you might have to buy back the stock and lose money on the deal. A stock might decrease to $30 per share. At this juncture, you can buy back the shares that you borrowed. You will get a profit, but you will have to pay back any commissions or dividends associated with the investment.
This is a thrilling option for trading when the market is falling. You can use a trade with the belief that the stock will keep on decreasing in value, thus giving you a better chance at a profit. This works well when you have figured out how a trend is moving while considering the amount of time it might take for a stock to get back up to a positive or growing rate again.
A short-trade is best when you have reviewed enough information on a stock. You must look at how the stock has changed and that you know how long your borrowing deal will last. You have to know what the terms are as sometimes a short sale could last for a few hours or a couple of weeks.
