How To Enter A Short Order

By: ispeculatornew
Date posted: 04.15.2008 (10:03 pm) | Write a Comment  (6 Comments)

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I received a comment on my previous post about how to short a stock through a broker so I will describe it here in case other people are confused.

When you go to enter an order you probably have a few options to choose from. I use Scottrade and I have the following options to choose from: Buy, Sell, Sell Short, and Buy to Cover. When you short a stock you would choose “Sell Short”. You would then enter the rest of the order: number of shares, stock symbol, order type (market or limit), and duration.

When you short a stock you are actually selling the stock. Therefore, if you want to place a limit order you would set your limit price higher than what the current price is. If you place a market order your order would get filled at whatever the bid price is (Unless your market order was for more shares than the bid offered. In that case you would take out more bids until your order got filled.) If you are confused about market and limit orders leave me a comment and I will write a post about them.

When you decide to cover your short position you would enter an order to “Buy to Cover”. You would then enter the rest of the order information as before.

Here are some further things to consider. When you try to sell stocks short you will find that not all stocks have shares available for shorting. This will happen to a lot of stocks that are good short candidates.

The reason for this is there are only a limited number of shares that are available to be borrowed and therefore shorted. This is one thing you have to take into account in your shorting strategy. I will provide shorting tips in a future post.

Another thing to consider is most discount brokers don’t allow you to short stocks under five dollars. This doesn’t mean that you can’t short stocks under five dollars, but your broker may not allow it.

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6 Comments

  1. Comment by RDB — April 17, 2008 @ 11:16 am

    you need to get an RSS on here so people can keep up with you site..let me know when you get it

  2. Comment by admin — April 20, 2008 @ 4:34 pm

    I have a RSS feed at the bottom of my site. Let me know if this doesn’t work.

    Phillip

  3. Comment by YS — April 23, 2008 @ 12:34 pm

    How long do you usually have to ‘buy to cover’ your short sale? For instance, if I’ve been following a weak stock that I deem to be the perfect shorting candidate, can I sell at the current high price, then ‘buy to cover’ my short sale a month or two later?

  4. Comment by admin — April 23, 2008 @ 6:32 pm

    There isn’t a time frame. You can hold on to your short position for as long as you like (barring a margin call). You don’t have to “buy to cover” within some time frame.

  5. […] couple of months ago I wrote a couple of posts about what shorting is and how to place a short order. Now I will give you some general tips on how to make profitable short […]

  6. Comment by Jim — August 15, 2009 @ 11:55 am

    Are there shorts on Fre? Where do you go to see the shorts? How do you know when they have to cover?

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