Hi towie, good to see an answer towie! I've posted on this subject more times than I care to think but one last time....
I do not understand why people think that shorting is more risky than going long. Old time traders will tell you that it is far easier to pick falling stocks than rising ones because every holder is potentially a seller whereas buyers have to be attracted in.
That aside, the fact is that whether I go long - buy a stock in the belief that it will go up and then sell for a profit, or go short - sell a stock and buy it back when it falls for a profit, the two are basically the same thing. its just that most retail punters don't even know you can short.
you cannot short via on-line brokers. You will need a full service broker. They will open a dedicated short account and you will need security with the broker - either cash or blue chip stock or both. usually the broker will want cover of a minimum of 20% of the short.
The easiest stocks to short are the so called ASX approved list. You can find the current list here
http://www.asx.com.au/data/Shortsell.txt
A short in these stocks can be made and held for upto 11 months from memory with the approval of the broker concerned as long as total market shorts haven't exceeded the ASX limit.
Many people believe that that is the extent of legal shorting but that is not true.
Some brokers will (despite it being against the rules) short other stocks day only. They will do this as long as the short is covered by COB. naughty naughty.
You can however legally short almost every stock on the ASX.
How you do this is buy borrowing stock from a small group of specialist brokers (as towie has noted one of them is Tricom.) Again you will need to set up an account with them. If you want a stock, you then phone them and they will see if they can find somebody willing to loan you the physical stock. You become liable for the stock and pay a fee.
if Tricom (or whoever) can locate some of the stock you are after you then sell physical stock on the market (this is why it is legal) and can then hold the short until either you cover or the original lender wants the stock back.
As you will quickly see, if you have ever wondered how a stock with no buy support can get driven in volume to levels it has never traded at and wonder who would be stupid enough to sell? well, its not just holders averaging down. Shorters don't care what price they sell at as long as they can borrow the stock and believe they will be able to buy it back a lower price than they sold it at !!
this is why shorting is an essential tool for professional traders in those Bear markets which typically (although we have all sort of forgotten it recently) run for longer periods than Bulls.
