Saxo offers multiple types of instruments where you can gain a short exposure. This includes CFDs, options, futures, and more. Short selling is available using SaxoTrader and SaxoTrader desktop, and you can trade these complex products when you have passed the product knowledge test. This can be done directly on the platform.
What is short selling?
Short selling is a strategy that allows you to speculate on an instrument's decline in price.
Short selling involves borrowing an instrument and selling it on the market with the expectation that its price will decrease. If the price drops, you can buy back the instrument at the lower price, return it, and gain the difference as profit.
Advantages and disadvantages of short selling
Advantages
- Potential profits in declining markets: Short selling allows you to potentially profit from falling prices, providing opportunities in bearish market conditions.
- Leverage: Using margin can amplify potential returns, as you can control larger positions with a relatively smaller amount of capital. However, leverage also amplifies potential losses.
- Diversification of strategies: Short selling adds another dimension to trading strategies, enabling you to hedge against long positions or diversify your approaches to market movements.
Disadvantages
- Stop outs: If the market moves against a short position, you may face stop outs, requiring you to deposit additional funds or close positions at a loss.
- Complexity and risk: Short selling is inherently more complex and comes with more risk than traditional strategies, requiring a deep understanding of market dynamics, and careful risk management.
- Margin requirements: To avoid stop outs, you must meet the margin requirements for the specific instruments in which you trade with margin. You can view the margin requirements for each instrument in the trading conditions.
What instruments can I short?
Cash products cannot be shorted at Saxo, which includes:
- Stocks
- ETFs
- ETPs
&
- Bonds
- Mutual Funds
However, on SaxoTrader/SaxoTrader desktop, you can short sell through CFDs, futures, options, and more. Please note that these products are margin products with leverage. You can view the individual margin requirements in the trading conditions.
- New to complex products? Try one of our free trading courses for beginners or go to our Products & services page to learn more about stocks and ETFs, bonds ,CFDs, mutual funds, FX, options, and futures.
How can I short an instrument?
CFD example
Open a trade ticket for the desired CFD as shown below (CFD on a stock in this example):
Select an order type > Choose Sell > Choose Quantity, Price (not for market orders), and Duration > To finalise the trade, click Place order.