Question by Wozza291: How is money made betting ‘against’ the market?
I understand how you can make money betting on the market going up. You would make a purchase, keep it, then sell it once the market goes up. What I can’t understand is how someone makes money betting on the market going down. Please explain.

Best answer:

Answer by MACD
By shorting stocks. This is done through a broker who sell’s you shares (that are carried in their inventory) with the stipulation that you must buy back the shares at market price latter.

Simplistic Example:

Acme plumbing company is selling for per share. YOU decide to short Acme plumbing stock. It drops to per share….then you close the short (buy back the shares for ) [ less than what you paid]…making a 20% profit.

In this same example if Acme plumbing goes up to a share and you fear that it may go higher, you decide to close the short ( buy back the shares at market price of )…you will loose 20% on the deal.

You can short individual stocks or a broad market index like the S&P500.

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