Recently, many people have asked me what shorting is all about. Actually, shorting boils down to four words: sell first, buy later. Many think stocks can only make money when they go up, but in fact, when you judge that the market is going to decline, you can operate in the opposite direction and still profit.

Let me give you the simplest example. Suppose you believe gold will fall, and you short-sell at $2,000. Later, the price really breaks below $1,900, and when it drops to $1,873, you close your position. The difference of $127 is your profit. That’s the core logic of shorting.

But I have to be honest, shorting sounds simple, but the actual operation carries huge risks. Many beginners rush in without understanding the rules and end up being harshly taught by the market. Stocks, forex, commodity futures—various financial products can be shorted, but each market has different rules involving borrowing securities, margin, short squeezes, and risk control. If you don’t understand one part, it’s easy to get caught in a trap.

In Taiwan, there are mainly three ways to short. The first is securities lending, which means borrowing stocks from a broker to sell. The downside is that popular stocks are often unavailable to borrow, and there are many restrictions—such as not being able to short during limit-down days, or being forced to cover before the annual shareholder meeting. The second is futures, which inherently have leverage and allow both long and short positions, but rollover costs can be high. The third, which I recommend for beginners, is using CFDs (Contract for Difference).

Why recommend CFDs? Because they have low barriers, simple rules, and no borrowing issues. If you want to short, just click “Sell,” set the amount and stop-loss/take-profit, and the system automatically calculates the required margin. Platforms like Mitrade require only $50 to deposit, and they offer free demo accounts. The account opening process is quick. Plus, they are regulated by ASIC in Australia, so your funds are safe.

When it comes to choosing stocks to short, there’s a lot of knowledge involved. You want to find targets where the stock price deviates the most from its intrinsic value. For example, a stock that has been hyped up in the short term or a company with suddenly weakening fundamentals and declining revenue—these are good shorting opportunities. But never short based on “feelings”—seeing a big rally and thinking to short is contrarian trading, and nine times out of ten, you’ll get burned. The correct approach is to confirm negative fundamentals or news, then wait for technical signals like high volume at the top or breaking support levels before entering.

Remember a few principles when operating. First, enter at relatively high points—not that the stock is rising all the time, but that it’s now expensive compared to its reasonable future value. Second, try to operate short-term; intraday or even minutes are better, as the risk is much lower. Third, always set a stop-loss—shorting has unlimited risk, and without a stop-loss, it’s basically gambling. Fourth, manage your capital strictly; shorting opportunities are rare, so when you see a high-probability setup, seize it, but also be prepared for market reversals.

Honestly, shorting isn’t for everyone. If you find the rules too complicated or the risks beyond your comfort zone, there’s no need to force yourself. Focusing on long positions or choosing more stable investment tools can also be good. But if you want to try, I suggest opening a demo account and practicing for two weeks—completely free—to experience what shorting really feels like. After consistently making profits in the demo, then start with small real-money trades. Shorting is a trading strategy, not gambling. The key is to have your own logic and control risks.