What does shorting stocks mean? Basically, it means the borrowing of stocks from a broker and then selling them in hopes that the price would go down. After which you will buy back these stocks at the lower price some time later and the difference would serve as your profit. Shorting stocks can be rather tricky and is definitely much more difficult than if you were to go long.

Sure, the maximum possible loss if you go long is pretty much everything as in 100% of you capital but if you look at the possible losses if you go short which could end up greater than what you might have lost if you went long, then a significant difference is visibly seen. Also, shorting your stocks can potentially give you 100% returns whereas going long would provide you with returns greater than that. So if we look at it from a risk reward angle, shorting is not as appealing. Furthermore, stock prices can be quite fickle and almost always go up in the long term.

If you want to give it a try, here are some things to consider before you actually do it.

1. Look at the trends in the market from a general perspective.

2. Look for the companies that are having sales declines, having legal troubles, losing its foothold in the market or anything that would contribute to a very sluggish outlook in the future.

3. Looking at things from a technical perspective, keep an eye out for the companies that are failing at its attempt to break a specific resistance level.

4. Have a precise entry point. Wait till the stock has rebounded and shows strength, if it fails yet again and goes back down, that would be a safer entry point.