'Short' Selling on Etoro - Make Money as The Price Falls - YouTube

Hey everyone, so what's short-selling? People want to know what short-selling

is.. Basically, what it is, is it's a way to make money off an asset - any asset, as the

price is going down. Normally when you're trading and when I first

thought about trading and stuff, I always used to hear "Buy low, sell high." You know,

that was always the thing. You want to buy something, and I always expected that

as it goes up in price, you know, it becomes more valuable. So, I buy one thing

at $10 you know, and a week later it's worth $20, so I can sell

it for 20. It's a very simple kind of Maths - buy low, sell high. You make money as

the asset goes up in value. But you can also make money as the value of an asset

falls in value, and it's referred to as 'selling'. Now, there's a bit of a language

problem here - a little bit of a language problem. So, when you get used to

trading - when you start trading, some of the language that I used out in the

normal world, beforehand, you know - I'd say "Yeah I want to sell Apple," and I used to

think that meant I have some Apple stock, and I want to get rid of it, and change

that for money, and go away and do something with my money. But, when it

comes to trading, there's two different terms. So, if you 'open a sell position' in

Apple, it means you're opening a trade which is betting that the value will go

down, and as the value of Apple goes down, you want to make money off it as the

value goes down. You're betting against the price of Apple stock. That's when you

'open a sell position'. So, if I'm going to 'Sell Apple' - kind of, it takes a bit of

discipline from everyone, because it's context based - you've got to watch it.

People mix up these terms... But, a 'sell position' is generally making profit as

it goes down. If someone says "I'm going to sell my Apple," because they've got the

word "my" in there, they're probably meaning that they want to

close their position in Apple. That's the correct kind of technical term, you know.

You have a position - you could open a buy position or you could open a sell

position - it means you've opened a trade. You can change the word "position" for "a

trade", all right. So, you can have a "buy position" or a "Sell

position" - that's your positions open. Whenever you have either made enough

money from any of those positions, and you want to take the cash, you "close" that

position. Or, if you're losing too much money, and you don't want to lose any

more, you can also close that position. All right, so that's 'closing a position',

or 'closing a trade', all right. It means you want to get out of it.

You've got something open, you want to get out of it, and you want to take your

money and run, basically - do something else with it. A "sell position"... "A sell position."

not "closing a position", but "a sell position" or a "sell trade"

is different. That's the one where you want to make money as the value of something

goes down, okay. It's not that confusing. I'll show you why it's not that

confusing. Here I am, in 'Trade Markets' alright, really simple - let's say I go to...

Say I go to Gold - and here's the familiar button - just, when I want to open any

trade on any asset, I go to 'Trade', and at the top, we've got "Buy" and we've got "Sell"

Buy, Sell, Buy... They really couldn't have made it much simpler for us, alright. And

what this means, if you press 'Buy', it means you want to bet that the value of

the asset is going to go up, all right. This is the current price, all right - this is

the price that you can buy it at. Actually, it's not really the current

price, it's the current price plus their little bit of a spread fee. That's what

that price actually is, and you can tell that it's not the actual price because

look, if I press 'Buy', here's "Sell" - watch this price as I click "Sell".

You see it changing? All right - so, somewhere in the middle of those two prices, the "Buy" price

and the "Sell" price, there is the actual price of gold at the moment. If I buy it,

they already make me buy it slightly higher than the actual price - than

the market price. That's their spread fee. If I "Sell" it, I buy it at a slightly

lower price than the actual market price. That's their spread fee again, all right.

That's why that number keeps... that changes when you press these. So, if I want to buy

it, it means I bet the value will go up, and I want to make money as it goes up.

it's at 1319 - if it goes up to 1320, I'll have made some money.

Awesome. Now, if I want to bet that the value

will go down, all I do is I press "Sell", and as I press Sell, I buy it at 1318.60

If the value goes down to 1317, I'll have made money.

The converse is also true though - the other way is also true. So, when I buy, if the value goes up

I make money, and if the value goes down, I lose money. If I'm selling an asset, if the

value goes down I make money, if the value goes up, I lose money, okay. Now, what

does that mean? If you think about it, why is it more risky potentially when you're

selling something? All right, so if I buy it, it can go up infinitely from here. It

won't, do you know what I mean - well, not yet unless

everything collapses or whatever, but it won't go up, but it could go up to 3,000

yeah. The most it can go down is 1319.02 - then it's at zero okay. So, my risk on the

downside - that's how much risk I have, which is a lot, because usually, you know, I use

leverage with gold. But, if I'm selling, okay - it can go down to 0, in which case that's

the amount of profit I could make, because remember, I'm hoping the value

will go down. Profit. What's the potential downside? It's infinite. So, if it goes up to

3,000, you know, that's all loss for me. It won't,

but what I'm trying to highlight is a point. When you're buying, you set your

'Take Profit' above, and you set your 'Stop Loss' as a lower number. When you're

selling, your 'Take Profit' is a lower number, and your 'Stop Loss' is a higher

number, okay. I hope that makes sense, because if it goes up in value, and you're selling

you're losing money. It's fairly simple. I'm sure you understand it. Alright, so

how does that work? How in God's name does that work, where you can make money

selling something... All right, so when you buy, you buy it - if it goes up in value,

someone goes "Oh, I'll buy it now, I think it's going to keep going up in value." And you go

"Alright, you have it now - give me the money - give me the value for it."

yeah - I've made my money. Selling is a little bit sneakier, really, in ho w it

actually operates. Alright, so... A way to imagine it is - let's imagine that I've

been looking at Apple stock, alright. I'm looking at Apple stock, and I'm standing

next to my friend John, here. And John's also looking at Apple stock, and there's

a big crowd of people over here who are also looking at Apple, and talking about

Apple. Now, John and these other people, they all think 'Wow, Apple's doing really

well, man I think that new iPhone's great - look at this, what they're

releasing - I think the value is going to go up, it's looking rosy for Apple." But I,

sneaky guy, have heard some news. I've heard some news about the latest iPhone... I

haven't really, this isn't investment advice, it's just an example... But, let's

say I've heard some news - some advice, and this advice isn't so good.

This information isn't so good - I think the price of Apple is actually going to

go down, you know. These guys - this whole crowd here - John, and these other people ...

They're all clamouring - they all want Apple, and I have some secret information

that it's going to go down somehow, or gut feeling... So, I go over to the broker, and

say "Hey broker, could you just give me 100 shares in Apple? It's $10

a share, all right, so give me 100 shares in

Apple, and I'll give them back to you, okay? And I'll give you spread fees." I

mean really, that's what Etoro's making - it's always making the spread fees

whether we're buying, or we're selling, they make their spread fees. So, I go to the

broker "Hey man, lend me 100 shares in Apple" He goes

"Yeah, sure give them back to though!" okay I go "Yeah, of course

I'm going to give them back to you!" He gives me 100 shares in Apple, all right. I then go, and I sell

them to John. I go "Hey John.." Actually, he's my friend, I feel bad about John,

so I go over to one of the people in the crowd, and I say "Hey guys in the

crowd, I've got 100 shares of Apple." And

everyone's going "Oh my God, Apple's going to go up, Apple's going to go up!." So, they buy them off me. So,

I've just sold 100 shares which I borrowed off the broker. I sold them to

this crowd for $10 each - I've got $1,000, yeah. Now, what happens is that Apple's

price - I was right, my information was correct - so Apple's price starts to fall, all

right. So, I'm here with my $1000 from those 100 shares I

borrowed, and sold to the crowd. The price is going down - the price is going down

of Apple. It goes down to $5, all right like a couple of weeks later. It's $5 per

share, so I take my $1000, I owe the broker - remember, I don't him an amount

of money, I owe him 100 shares. That's what I borrowed off him. So, I take

my $1000 and I go over to the crowd, who are now like "Ah God, I want to

get rid of these - it's going down!" I go "I'll buy them off you." So I go over, and I

buy 100 shares for $5.00, okay. That's $500, all right. I go, I spent $500

on those shares... I take the shares - the 100 shares which I've bought for $5,

and I give them back to the broker. I've paid the broken the spread fee, and okay,

he's happy. Alright, so I now have - I've given him back his 100 shares. I

have $500 left. I sold them for $1000, they went down, when they went down

enough, I went and bought them back, and gave them back to him. It's left me with

$500. That's how you make money with the prices going down, in a sort of simple

analogy. Okay, so in that same analogy there, what happens if the price goes

against me? So, I've just borrowed the 100 shares off the broker, I've sold

them to these guys for $10 a share... I've got $1000, alright. Now, I have to give

the broker back his 100 shares. The broker is always going to get paid, all

right. They're not like the nice guy, just doing me a favour. The broker's going to get his

money, all right - every time. So, I owe him 100 shares. So, let's say the price actually

goes up instead of going down. I've sold them at $10 each - I've got $1,000

alright. So, I'm waiting two weeks and now the price hasn't gone down to 5, it

was 100, I was expecting it to go down - it's gone up to 15...

I've still got to give this broker guy his 100 shares back, so I've got to

buy them back now. So, I have to go to that crowd, cap in hand, I have to spend

that $1000 I made, and I also have to fork out another $500

of my own money because it's now - they're 15

each, and I need to buy a 100, you know. So, I have to actually pay out

an extra $500... So, that's how you'd lose money in that situation.

Either way, I have to give this guy his 100 shares back, and I can't, you know

just make the money out of nowhere, or change the market or something. Literally, if the

price goes the wrong way, I'd have to buy those shares back, and I have to give

those 100 shares back to him. That's what happens in that analogy if

it goes against me. Either way, he's getting paid - the broker's always getting paid. Now

why doesn't the broker charge me interest or something - to borrow those

shares? On other places, I think they actually do. On Etoro, it seems to be it's

just the spread fees - they just want their spread fees. If I open a 'buy' trade, I pay

them spread fees. If I open a 'sell' trade, and do my sneaky business, then I also

owe them spread fees. I always pay spread fees. Now, do I have to go through this

complex process of buying from him, selling to them, getting it back, taking it...

No. I just press 'Sell'. If the value goes down, I'm making money. If the value goes

up, I'm losing money, you know. If I lose too much, they'll stop me out of the

trade. It's that simple, but I just wanted to explain the mechanics of 'how can that

happen?' How can it be done? You borrow from the broker, you sell to someone at

that time, you wait till the value goes down, you buy the assets back, and give

them back to the broker. You keep the difference. So that's kind of how selling

works. There's a lot of people talking about how, you know, there might be a

'correction' - there might be a this, there might be a... A 'correction' is a way of saying

the market goes horribly wrong, by the way - the price goes down. They never say

"I think the price is going to drop." They always try and coat it in a more

positive way of looking at it... "There's a correction." So, even when it goes down,

it's correct, somehow, you know. So basically, if there's

a correction, the whole value goes down, this is a way that people can make money,

even if the value of assets is going down. It is risky though, I mean I listen

to people - especially around Cryptos. If you're going to sort of do ...

I tried initially, when I first started, this idea of like I buy low, sell high.

Then, when I see it going down, I short sell it on the way down, then I try and

close that trade. Then I try and buy it as it goes up, then I short... The problem is

it's very hard to time where's the top, where's the bottom, where's the top...

I found it super difficult. So, all I'm doing at the moment is copy trading,

and kind of leaving those decisions to the three people I'm copying. Jay and here

Mr Thor, Fastik and Jay. Look, they're doing well. I'll give an update

on what I've been doing, because I've added some money to them, but at the

moment I'm not trying to do that - I'm not trying to buy and sell. And I hear Jay, you know,

he was trying to short Ripple, and he got so much flak for it, he really did. People

were just going nuts. But anyhow, even he says, you know, how difficult it is to short

Cryptos because they move in such a volatile way. It's very hard, you know. I

found it as well, very very hard to judge where to buy and sell, so I'm not doing

that anymore. I'm going with the general

overall trend, rather than, you know, the spikes in that trend do you know what I mean?

Instead of going buy, sell, buy, sell, buy, sell, buy, sell, I'm just going to buy...

Do you know what I mean - and trying to disregard this. I'm going with the longer-term trend. But, that is

how you do short selling on Etoro. It's actually fairly simple. You

just click the 'sell' button, put your trade, and realise that your

'stop-loss', and your 'take profit' will be the other way around, against the

value of the stock. There we go.