Short selling is one of the methods being used by experienced traders and investors as a way to further take advantage of opportunities to profit in the stock market. Most normal or ordinary stock investor does not engage in short selling due to the risks involved. But for those that wish to try it out, it is important to know what short selling is all about and how it is being done.

What Is It?

Short selling is basically a practice in stock trading that involves selling stock shares even when one does not own them and then trying to buy them again at lower prices. This practice can earn stock traders and investors some gains if it is done the right way. In order to achieve success in a short sale, it is important that stock share prices goes down after the shares are sold. This will enable the trader or investor to buy them at lower prices and gain from the trade.

How To Identify Stocks For Short Selling

In a short sale, it is important that the trader monitor and track the market on a constant basis. This may also require studying the stock market charts very carefully. Looking at the market trends is also important since it may provide the trader with a means to generally determine a potential down trend that will make short selling viable.

Look For Weak Stocks

In short selling, it is important also to be able to identify weak stocks. They are the basis on why this trading practice is being done. One of the characteristics of weak stocks is that it is always experiencing selling pressure from current investors. Short sellers also try to analyze the reasons behind why the stock is being considered weak with its stock price falling.

Bad News Is Good News

In the case of short selling, bad news concerning companies may be considered as a potential stock to short sell. Many stock traders consider upcoming bad or negative news about a certain company to consider its stock as a potential candidate to short sell.

Look For Huge Rallies

Being aware of stocks experiencing huge price rallies may also be a potential for short selling. Certain huge rallies in stock prices, especially if they happen without any credible reason behind them, increases the probability of it crashing down later. This might make such stocks ripe for short selling.