Stock is not a new word, it has been in existence for a long time, the name simply refers to the action of buying and selling shares of companies worldwide. Differences in the prices of each stock with regards to time are what is maximized to make big income by traders. It sure does look simple to start with, but like anything that has to do with money, earning profits does not come easy. To go deeper, the stock of a company means that the company has decided to create capital by involving the masses. For some of the people buying into the stock, the hope is that with time, as the company gets to make a profit, so do they. This line of action is now being done on a massive scale in the global market.
Of the many entities that have dug themselves into the economy, the stock seems to be in the top 3 without any trace of slowing down. Stocks could be done regularly such as the day trading strategy various people use as a means of daily living. In some cases, stocks represent investment opportunities for those looking to earn in other ways from the money earned in other jobs. It's either a person learning all about a stock before getting into it or hiring experts to act as a middleman. These middlemen are called brokers or financial advisers depending on their job description. Now, there is a sneaky way of participating in stock trade that is making rounds worldwide.
This particular trend is called shorting a stock which is basically borrowing a person's stock and then selling at a price. The seller would expect that stock to lose value and then buy it back at a cheaper price. Differences in the sale and purchase bring in the necessary profit before the original seller who has to return the borrowed stock. An example is a short seller who knows that the stock of Microsoft may be overrated at 700 dollars per share, the next action is to borrow 5 shares from a broker and sell. When Microsoft's stock drops to 400 dollars, the short seller will buy it back and make a good gain of 300 dollars before returning the shares to the broker.
The first thing to notice is that experts or experienced persons are taking advantage of newcomers. It is good to note that in every case, shorting a stock benefits the person that initiates the transaction. There are cases that would prove to be beyond the analysis and processes done earlier.
So, nobody should see shorting of stock as a sure option. Short selling is mostly done during the period of decrease in prices to protect gains or minimize losses. When successful, short-sellers gain more and are motivated to keep trying it. Any good trader should always take caution and not be carried away. The risk entails losing so much more money than would be expected when buying and selling stocks the proper way.