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This link states:

Shorting (or selling short) allows professional traders to profit regardless of whether the market is moving up or down, which is why professional traders usually only care that the market is moving, not which direction it is moving.

How so?If I sell short, then I make a profit only if the price goes down so I can buy it back at a lower price.

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    You should read the whole passage in the link. To answer your question you can profit by going long when the market moves up (which is mentioned in the article). – Victor Apr 27 '13 at 21:44
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Being "long" - expecting the price to go up to make a profit - is a two step process:

1) buy

2) sell

Being "short" - expecting the price to go down to make a profit - is a 5 step process:

1) borrow someone else's asset

2) sell their asset on the open market to somebody else a third party

3) pocket the proceeds of the sell for your own account

4) buy an identical asset for a cheaper price

5) return this identical asset to the person that let you borrow their asset

if this is successful you keep the difference between 3) and 4)

  • When going short, there is also a fee (interest) to be paid for the borrowing of the asset in 1), and this cuts into the profit made (as of course do the brokerage fees for buying and selling the asset). – Dilip Sarwate Apr 27 '13 at 23:02
  • @DilipSarwate I would venture to say that the fees are negligible, and since you will most likely be using margin already this is an accepted cost that will seem indistinct from the costs of going long. These are Annual Percentage Rates that you will not notice if you are trading volatility and "moving prices" as the OP mentioned. But I don't object to mentioning it, the more information the better. – CQM Apr 28 '13 at 0:17
  • @DilipSarwate - with CFDs you pay interest on long positions held overnight but you actually get interest paid to you for short positions you hold overnight. – Victor Apr 28 '13 at 0:39
  • To the short seller, it looks like 2 steps as well, sell then buy instead of the reverse. Not all brokers deposit the cash to your account, by the way. In high interest times, this can be costly. – JTP - Apologise to Monica Apr 28 '13 at 1:09
  • @JoeTaxpayer indeed. to understand the concept initially breaking it down this way helped me. Sometimes locating the shares to borrow can be an additional step, in the stock market. – CQM Apr 28 '13 at 1:31
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How so? If i sell short, then i make a profit only if the price goes down so i can buy back at a lower price.

Yes, but if the price is going up then you would go long instead.

Shorting a stock (or any other asset) allows you to profit when the price is going down. Going long allows you to profit when the price is going up. In the opposite cases, you lose money.

In order to make a profit in either of those situations, you have to accurately assess which way the price will trade over the period of time you are dealing with. If you make the wrong judgment, then you lose money because you'll either sell for a lower price than you bought (if you went long), or have to buy back at a higher price than you sold for (if you went short).

In either case, unless the trader can live with making a short-term loss and recouperating it later, one needs a good stop-loss strategy.

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    Agreed (John) the quote is ambiguous. Assuming we know that we can make money when stocks go up, shorting is a way to make money when you know (?) a stock will go down. But not "you'll make money regardless of market move," you need to pick a direction. – JTP - Apologise to Monica Apr 27 '13 at 19:26
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    @JoeTaxpayer - if you read the whole article in the link you will find it talks about going long and short. It is saying that shorting gives the trader a tool to profit when the market moves down to add to their tool of going long to profit when the market moves up. So by adding shorting to their toolbox they can profit if the market goes up or down because they already have going long in their toolbox. – Victor Apr 27 '13 at 21:38
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    @victor - The quote, out of context, remains ambiguous. Michael's answer was enough that I wasn't planning to answer, myself. Not inclined to read the full article on a topic I already know. The source is a mixed bag, depending on author. Not a site I've ever quoted (to my recollection) – JTP - Apologise to Monica Apr 27 '13 at 23:08
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    @JoeTaxpayer - fair enough, the OP copied only part of the article to make it ambiguous, whilst if the whole article is read in total, there is no real question to ask. – Victor Apr 27 '13 at 23:22
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    @Victor That was similar to my thought. The article makes it pretty clear, but the quote from the article is ambiguous. Reading the whole article, it's clear that a) the answer is spelled out, and b) the last paragraph is still ambiguous because this sentence: "Shorting (or selling short) allows professional traders to profit regardless of whether the market is moving up or down" isn't great. I guess I would have phrased it "selling short and buying long give traders enough basic tools to profit when the market moves up or down." – John Bensin Apr 27 '13 at 23:52

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