The act of short selling enables traders to profit from price declines. By borrowing an asset (shares, indices or other securities) from a broker and then selling it at its current price, hoping it will fall in value, they can buy it back again for a lower cost and pocket the difference as profit. How to Short Stocks UK.
In November 2012, EU regulation 236/2012 brought into force disclosure requirements that make publicly available a daily database of declared net short positions in stocks traded on EU markets. It is therefore possible to construct standard long-short portfolios using this data, and – unlike with the equivalent US data, which was only available for subscription – there appears to be no reason why these strategies should not be profitable.
How to Short Stocks UK: Everything You Need to Know
However, the new availability of short position information does introduce a number of other challenges to the study of these trading strategies. For example, if the lender who provides shares to short sellers declares a dividend during the life of the trade, then this must be paid out to them. This 'covering' is a potential source of unanticipated losses if it occurs in the middle of a short trade, which may necessitate closing the trade prematurely.
To practice trading FTSE 100 CFDs, spread betting, or inverse ETFs in a risk-free environment, open a demo account with IG and start trading. Remember to use proper risk management tools and trade responsibly.