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If you’re looking to short stocks and the stock market, we’ve compiled a list of the best brokers for going short. All brokers in this list are authorised and regulated by the FCA. Whenever you plan to go short ensure that you are using the best platforms for shorting indices and choose a brokers from our comparison list of the best brokers for trading short and potentially profiting if the market goes down:

Types of broker that offer shorting and the ability to go short


Compare Index Brokers For Going Short

All the index brokers are authorised and regulated by the Financial Conduct Authority where client funds are segregated and protected under FSCS. Note:

Featured Forex Broker What Forex pairs can you trade? How much does Forex trading cost? CEO Interview More Info

IG

With IG, you can choose to trade more than 80 currency pairs – from majors, such as GBP/USD to exotics such as HUF/EUR. You can trade these forex pairs via CFDs or spread bets. Get spreads from just 0.6 points on pairs like EUR/USD with the UK’s No.1 FX provider.

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews

CMC Markets

Trade forex on over 300 forex pairs, including EUR/USD, GBP/USD and AUD/USD, plus our customised range of 12 forex indices​. Spreads on EUR/USD, AUD/USD and USD/JPY start from just 0.7 points. CMC USD Index​ spreads from 0.25.

Read Peter Cruddas CEO Interview

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CMC Reviews

Pepperstone

Trade 61+ currency pairs with deep liquidity with pricing from multiple sources. Get some of the lowest forex spreads on the market with raw spreads from 0.0 pips on Razor accounts Tamas Szabo Pepperstone CEO Read Tamas Szabo CEO Interview Visit Pepperstone

Pepperstone Reviews
Fineco Trade 50+ Global Forex pairs Forex pairs with Fineco Fineco Forex spread are as low as, GBP/USD 1, EUR/USD 0.8, EUR/GBP 1

Paolo Di Grazia, Fineco General Manager Paolo Di Grazia, Fineco GM

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Fineco Reviews

Saxo Capital Markets

Access 182 FX pairs across majors, minors and exotics, plus spot metals, from only 0.4 pips Ultra-competitive FX spreads and trade major FX pairs from 0.4 pips. Competitive entry prices and even lower rates for active forex traders. Andrew Edwards Saxo Capital Markets UK CEO Read Andrew Edwards CEO Interview Visit Saxo

Saxo Reviews

XTB XTB Brokers

Trade 48 currency pairs, 24 hours, 5 days a week, micro-lot trading available Low forex spreads from 0.1 pips on EURUSD, 0.3 pips on GBPUSD and 0.02 on AUDUSD.

Arnaout Omar Omar Arnaout

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XTB Reviews

Spreadex Financials

Spreadex

Speculate on over 60 currency pairs with advanced technical analysis tools including Pattern Recognition, ProTrend Lines and advanced indicators plus drawing tools Low spreads from 0.6 pts on EUR/USD and 0.9 pts on GBP/USD with 24 hour trading on most FX markets

Jonathan Hufford

Visit Spreadex

Spreadex Reviews

Plus 500

Trade FX CFDs on 60+ Forex Pairs like EUR/USD, GBP/USD and EUR/GBP with up to 1:30 leverage Variable Forex spreads on currency markets. Plus500 does not charge additional Forex dealing commissions. Coming Soon Visit Plus 500

Plus 500 Reviews

City Index

Trade on 84 global FX pairs like EUR/USD, GBP/USD and USD/JPY at City Index with fast execution and tight spreads Trade forex CFDs, DFT or spread bets with tight spreads from 0.5pts on major FX pairs Coming Soon Visit City Index

City Index Reviews

eToro

Trade CFDs on 47 of the most popular currency pairs with trades based in USD with eToro Forex Forex spreads are variable and trading costs are built into the price. Daily finance is charged on overnight positions.

Yoni Assai Interview

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eToro Reviews

Best CFD Brokers For Shorting The Market

Use our comparison tables to compare CFD brokers authorised and regulated by the FCA. Choose or switch to a CFD broker that offers the most markets, best pricing and client security.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. 

Featured CFD Broker What can you trade via CFDs? What are the CFD trading costs? CEO Interview More Info

IG

IG clients can trade a range of over 17,000 CFD markets Trade CFDs on interest rates, bonds, sectors, forex, indices, global shares, commodities and cryptocurrencies Opening an account is free, and charges are competitive. Trade spreads from 0.6 points on key FX pairs like EUR/USD, 1 point on major indices like the Germany 30 and FTSE 100, and 0.3 points on Spot Gold.

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews

CMC Markets

Trade contracts for difference (CFDs) and access over 9,500 instruments with competitive spreads. Trade CFDs on forex, indices, cryptocurrencies, commodities, shares and treasuries. Trade CFDs on major forex pairs from 0.7 points and popular indices from 1 point. When trading UK shares a commission is charged from 0.1% or 2 cents per unit for US.

Read Peter Cruddas CEO Interview

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CMC Reviews

Pepperstone

150+ instruments across FX, indices, equities, cryptos, energy and commodities, and more, across three, free powerful platforms During liquid times, CFD spreads can go as low as 0 pips on the EURUSD on the Pepeprstone Razor account Tamas Szabo Pepperstone CEO Read Tamas Szabo CEO Interview Visit Pepperstone

Pepperstone Reviews
Fineco Trade Fineco CFDs on thousand of asset classes Equity, Indices, Commodities, bond and Interest Rates Share CFDs have no additional spreads, indices have spread as low as 0.4pips on S&P 500 and 0.6pip on Nasdaq 100 and FTSE 100. FX spreads on 50+ pairs from 0.8pips.

Paolo Di Grazia, Fineco General Manager Paolo Di Grazia, Fineco GM

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Fineco Reviews

Saxo Capital Markets

Access 9,000+ CFDs and trade CFDs on single stocks, indices, forex, commodities, options and bonds. Ultra-competitive pricing for trading UK stock CFDs from GBP 8, and US 30 Wall St. from 2 points. Andrew Edwards Saxo Capital Markets UK CEO Read Andrew Edwards CEO Interview Visit Saxo

Saxo Reviews

XTB XTB Brokers

Trade over 1500 global CFD markets including Forex, Cryptocurrencies, Indices, Commodities, Share CFDs and ETFs. Low forex spreads from 0.1 pips, stock CFD commission from 0.08%

Arnaout Omar Omar Arnaout

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XTB Reviews

Spreadex Financials

Spreadex

Trade one of the widest ranges of CFD markets including shares, indices, forex, commodities, bonds and interest rates. CFD spreads start from just 0.6 pts on EUR/USD, 1pt on UK 100 and 0.4 pts on Gold

Jonathan Hufford

Visit Spreadex

Spreadex Reviews

eToro

Trade CFDs in USD on eToro on a wide range of stocks, forex, indices, commodities and copy other CFD traders Cost are based in USD and eToro CFD trading costs are built into the spread.

Yoni Assai Interview

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eToro Reviews

Plus 500

Trade CFDs on a wide range of Indices, Forex, Commodities, Crypto, Shares, Options and ETFs Plus 500 CFD spreads are variable, yet competitive for new traders. There is no commission. Overnight funding is charged on positions. Coming Soon Visit Plus 500

Plus 500 Reviews

City Index

CFD Trading with City Index gives you access to over 4000 global markets including Indices, Shares, FX, Commodities and Bonds. Fixed and variable CFD spreads from 0.5 points with benchmark UK financing is LIBOR +/-2.5% Coming Soon Visit City Index

City Index Reviews

ETX Capital

Trade CFDs on ETX on over 5,000 instruments in all major asset classes including FX, Indices, Shares and Commodities.. Trade CFDs low commissions through ETX's pooled liquidity from a range of sources to deliver the best prices and narrowest spreads. Phil Adler CEO Interview ETX Reviews

Best Spread Betting Brokers For Shorting Stocks & Indices

Use our comparison reviews to compare spread betting broker costs, spreads, offers and features. Only Spread Betting Brokers authorized and regulated by the FCA where client funds are protected under the FSCS are featured.

Spread betting carries a high level of risk and losses can exceed your deposits. Featured brokers appear first.

Featured Spread BettingBroker What markets can you spread bet on? How much are the spread betting fees? CEO Interview More Info

IG

Go long or short and spread bet on more than 17,000 markets with with IG, the world’s No.1 provider Spread bet from 0.6 points on key FX pairs like EUR/USD, 1 point on major indices like the Germany 30 and FTSE 100, and 0.3 points on Spot Gold.

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews

CMC Markets

Spread bet on the price movements of thousands of financial instruments, including indices, currencies, cryptocurrencies, commodities, shares and treasuries. Competitive spreads on our spread betting instruments, including major FX pairs from 0.7 points, major indices from 1 point and crude oil from 3 points.

Read Peter Cruddas CEO Interview

Visit CMC

CMC Reviews

Pepperstone

Spread bet on 150+ instruments across FX, indices, equities, cryptos, energy and commodities, and more, across three, free powerful platforms Spreads on our MetaTrader 4 and MetaTrader 5 platforms are variable, with prices coming from many providers and sources to ensure you're getting the best price. Tamas Szabo Pepperstone CEO Read Tamas Szabo CEO Interview Visit Pepperstone

Pepperstone Reviews

Spreadex Financials

Spreadex

Trade one of the widest ranges of spread betting markets including large and small cap shares, indices, forex, commodities, bonds and interest rates. Spread betting spreads start from just 0.6 pts on EUR/USD, 1pt on UK 100 and 0.4 pts on Gold

Jonathan Hufford

Visit Spreadex

Spreadex Reviews

City Index

Spread Betting with City Index provides a tax-free* way to trade over 8000+ global markets. Fixed and variable spreads from 0.5 points with benchmark UK financing is LIBOR +/-2.5% Coming Soon Visit City Index

City Index Reviews

ETX Capital

Trade over 5,000 markets with Profits exempt from both Stamp Duty and Capital Gains tax within the UK. ETX offer competitive spread betting costs with major FX pairs from 0.6 pips and spreads on major Indices from 1 pt. Phil Adler CEO Interview ETX Reviews

Best DMA Brokers For Going Short via DMA CFDs or Futures

Compare brokers that offer Direct Market Access (DMA) who are authorised and regulated by the FCA.  Use DMA to get inside the price and reduce your trading costs by getting better prices.

DMA Broker DMA Access DMA Execution Account Types CEO Interview More Info

IG

Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
CFD
Spreadbetting:

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews
CEO Interview

Saxo Capital

Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
CFD
Spreadbetting:
Andrew Edwards Saxo Capital Markets UK CEO Read Andrew Edwards CEO Interview Visit Saxo

Saxo Reviews
Fineco Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
CFD
Spreadbetting:

Paolo Di Grazia, Fineco General Manager Paolo Di Grazia, Fineco GM

Visit Fineco

Fineco Reviews
Interactive Brokers Interactive Brokers Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
CFD
Spreadbetting:

Thomas Peterffy

IBKR Services

Best MT4 Brokers For Trading Short

MT4 or MetaTrader 4 is currently offered by over 600 brokers worldwide. Compare the top MT4 brokers to ensure you get the best pricing, tools, analysis and features.

Featured MT4 Broker What can you trade on MT4? How much does MT4 trading cost? CEO Interview More Info

IG

IG’s MetaTrader 4 package delivers instant access to 18 free add-ons and indicators, giving you an edge in your trading. You’ll also have the option to download thousands more from inside the MetaTrader 4 platform. Take advantage of minimum spreads of 0.6 on a host of forex pairs with IG. The minimum lot size on MT4 is 0.01 lots, helping you manage the risks of high-volume trading.

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews

CMC Markets

Trade CFDs on 30 currency pairs including EUR/USD, GBP/USD and USD/JPY, major indices like the UK 100 and US 30, plus popular commodities such as Gold, Silver and Crude Oil Trade Forex from 0.7 pips on MT4, indices from 1 point and Gold from 0.3.

Read Peter Cruddas CEO Interview

Visit CMC

CMC Reviews

Pepperstone

Trade 85 pre-installed MT4 indicators available on the desktop app for greater insight into market trends During liquid times, MT4 spreads can go as low as 0 pips on the EURUSD through the Razor account Tamas Szabo Pepperstone CEO Read Tamas Szabo CEO Interview Visit Pepperstone

Pepperstone Reviews

XTB XTB Brokers

Trade over 1,500 markets through MT4. Test and optimise your trading strategies with the MT4 Strategy Tester Low forex spreads from 0.1 pips, stock CFD commission from 0.08%

Arnaout Omar Omar Arnaout

Visit XTB

XTB Reviews

ETX Capital

Trade over 60 FX pairs including majors, minors and a range of exotics currency pairs with ETX. ETX offer low FX trading costs on spread betting and CFDs with spreads on EURUSD from only 0.6 pips, and GBPUSD from 0.9 pips. Phil Adler CEO Interview ETX Reviews

City Index

With City Index’s MetaTrader4 platform, you can trade over 80 Forex pairs, including majors, minors and exotics. Ultra-tight spreads, fast trade executions and unique trading tools. Coming Soon Visit City Index

City Index Reviews

Best Options Brokers For Buying Put Options or Selling Calls to Go Short

Use our comparison tables to compare the best UK based options brokers authorised and regulated by the FCA. Choose or switch to an option broker that offers the most markets, best pricing and client security.

Featured Broker Futures & Options Services Account Types CEO Interview More Info

Saxo Capital

Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
Options:
CFD
Spreadbetting
Andrew Edwards Saxo Capital Markets UK CEO Read Andrew Edwards CEO Interview Visit Saxo

Saxo Reviews

IG

Stocks:DMA
FX:
Index:CFD
Commodities:CFDs
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
Options:
CFD
Spreadbetting

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Reviews
Fineco Stocks:DMA
FX:
Index:CFD
Commodities:CFDs
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
Options:
CFD
Spreadbetting

Paolo Di Grazia, Fineco General Manager Paolo Di Grazia, Fineco GM

Visit Fineco

Fineco Reviews

Linear Investments

Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
Options:
CFD
Spreadbetting

Jerry Lees

Linear Services
Interactive Brokers Interactive Brokers Stocks:
FX:
Index:
Commodities:
Voice:
Online:
Strategy:
Prime:
DMA:
Futures:
Options:
CFD
Spreadbetting

Thomas Peterffy

IBKR Services

Use our comparison tables to compare the best UK based futures brokers authorised and regulated by the FCA. Choose or switch to a futures broker that offers the most markets, best pricing and client security.

Futures trading carries a high level of risk and can result in losses that exceed your deposits. Featured brokers appear first.

Here is a list of futures brokers based in the UK that are regulated by the FCA

Prime Broker DMA Access Execution Account Types CEO Interview More Info

Saxo Capital Markets

Stocks:
FX:
Futures:
Options:
Voice:
Online:
Strategy:
Prime:
DMA:
Omnibus:
Liquidity
White Label:
Andrew Edwards Saxo Capital Markets UK CEO Andrew Edwards Visit Saxo

Saxo Services

IG

Stocks:
FX:
Futures:
Options:
Voice:
Online:
Strategy:
Prime:
DMA:
Omnibus:
Liquidity
White Label:

June Felix, IG CEO

Read June Felix CEO Interview

Visit IG

IG Services

Linear Investments

Stocks:
FX:
Futures:
Options:
Voice:
Online:
Strategy:
Prime:
DMA:
Omnibus:
Liquidity
White Label:

Jerry Lees

Linear Services
Interactive Brokers Interactive Brokers Stocks:
FX:
Futures:
Options:
Voice:
Online:
Strategy:
Prime:
DMA:
Omnibus:
Liquidity
White Label:

Thomas Peterffy

IBKR Services

How to Go Short: Using spread betting & CFDs to bet on the market going down

We covered short spread bet trading in our how spread betting works guide and all spread betting brokers offer the facility to bet on markets and stocks going down.

This is one of the main benefits and being able to bet on markets going down is a useful tool in post speculation and hedging with spread betting.

The principle of shorting stocks is not new, professional traders and hedge funds have been doing it for years.  It works like this:

  1. Fund A thinks the price of Vodafone will go down and they want to bet on a drop in the short term (a few months).
  2. Fund A knows that Fund B has a long term (a few years) position in Vodafone shares.
  3. Fund A asks to borrow Fund B’s Vodafone shares so they can sell them to someone else.
  4. Fund B lends Fund A the Vodafone shares and charges 5% of the value as a fee.
  5. Funds A sells the Vodafone shares on the London Stock Exchange
  6. A month later Vodafone shares have dropped in price and Fund A buys them back.
  7. Fund A then gives the shares back to Fund B.

For the private spread betting investor, it is much simpler.  They just bet a certain amount per point that the shares will go down. There is no need to worry about borrowing stock from anyone.

The spread betting broker will either net the position off against one of their clients that is long, or will borrow the stock just like Fund A did in the example above.  Then give it back when the client closes their position.

Obviously, this example is based on a single trade and the intricacies of a brokers stock lending and borrowing team are much more complex than this.

Best CFD & Spread Betting Brokers For Going Short

You can compare all the best spread betting broker in our comparison tables - or take a quick lok at these top three spread betting brokers for going short:

How to find out what hedge funds are shorting and whether or not you should follow them

We've covered how to short major stocks like Facebook, Deutsche Bank and even Cryptos like Bitcoin when they were booming. But, how do you find good shorting opportunities in the stock markets?

But if you want to see what other traders are doing, one option is to copy other experienced traders and sell short when they do. You can, of course, do this through the new breed of social trading brokers like eToro or Pelican.

Or, instead of following complete amateur investors you could keep an eye on what the hedge funds are shorting and copy them instead.

Where to find out what hedge funds are shorting

It's actually pretty easy. As with having to notify the exchange when you own more than a certain amount of a listed company. Firms have to disclose when their short positions exceed o.5% of a company.

You can find this information reported in the financial press, but also here:

Which brokers can you short stocks through?

If you want to short stocks you can use a CFD broker or spread betting brokers. Use our trading account comparison tables to see which suits your trading style best. Or read our reviews on any of the below that offer equity stock shorting:

Should you copy what hedge funds are shorting?

Now you know how to find out what hedge funds are shorting. But. Before you start playing amateur sleuth and screeching "core blimey, there's more shorts than a Wham concert in this stock" it's important to cover the risks of following hedge fund's short positions...

Hedge funds don't get it right all the time

There was a great article in the FT years ago about how hedge fund managers at GLG (one of the biggest UK hedgies and owed by Man where I used to work) about how they only get stock picking right about half the time. And that that, was in fact, ok.

The reason being of course that (as you should know by now) it's not what you buy or sell. Trading, is really about how you manage risk and your positions after a trade has been put on.

GLG's approach is as basic as buy low, sell high in that they run profits and cut losses. So, if they only pick winning trades half the time, they still make money by making having a greater win:loss ratio on the positions.

If you want to know more about win-loss ratios read The Art of Execution by Lee Freeman-Shor. It's one of the best books on post-execution trade strategy.

Hedge funds operate on a long/short basis

Most alternative asset managers, aka hedge funds, will have two funds. One will generally be a long-term income or growth fund that invests in assets they believe will outperform the market or are income generating through high dividends or bond yields.

Hedgies may also have a long/short portfolio which consists of stocks or assets that are market neutral. The idea here is that it doesn't matter if the overall market goes up or down as the fund will have an equal amount of long and short positions (albeit with a slight weighting if they have an overall market bias).

Which means that if a hedge fund has a large disclosed short positions they may not actually think the stock is going to go down. It may be part of a sector or pairs trade. For example, if a hedgie doesn't know (or care) whether the banking sector in the UK will go up or down. But does think that Barclays will under-perform Lloyds, they will sell Barclays and buy Lloyds.  In this case, they have limited their exposure to large moves in either the underlying index or the banking sector.

Hedge funds are generally always invested

When an investor gives a hedge fund their money they are doing so for the fund manager to have it actively traded in the market.  Even though hedge funds tend to be higher risk than other types of fund they still have to have some sort or risk controls and portfolio exposure caps.

They do not (or should not) have the money sat around in cash then put all their eggs in one basket and Rio trade on a whim.

So when hedge funds disclose a large short position it will probably be part of an overall portfolio of positions hedged with options, index futures or some other OTC product you've never heard of and wouldn't be able to trade even if you wanted to.

What are the risks of shorting stocks

Well as with all derivatives trading you can lose a massive amount of money very quickly. Here are the risks you have to consider:

  • In theory, a stock can go up forever so your potential loss is unlimited
  • You'll pay financing charges on the position
  • You may be forced to buy back your position
  • A company may be suspended and your margin will go to 100%
  • The stock could become very volatile and you broker may ask for over 100% margin (as with crypto trading)

So why bother looking at what the hedge funds are shorting?

Well, what makes a market is opinions. You can either jump on the bandwagon and follow them or wait patiently for the bear squees when they buy their large position back.

What the major players are buying or selling, as with technical analysis, economic indicators, news flow, fundamental research all provide stimulus for trading.

If you want to see what's going down flick through the charts on Investors Intelligence. You can rank stocks by Stockcube's propriety trend score as well as P&F breakout signals. Or of course you can look at the trading signals section to see what stocks are potentially worth looking to short.

Going Short – An Example Of Winning A Trade From A Falling Market

If we recap what we've already learned – choosing to go short allows a trader to benefit from the market should they believe its price will drop.

Let's imagine we're looking at some Apple shares:

A Successful Trade On Apple – Going Short

If Apple is currently trading at 11230 : 11234

You think that the market price of its shares are likely to fall and therefore you decide to bet at 11230 on “sell” for £5 a point. That means for each point that the market goes down, you gain £5.

After a week, you are proved correct in your prediction. The price of Apple's shares drop to 11218 : 11220. You decide that you are going to close the position at 11220, choosing to buy.

11230-11220=10

As your spread bet was £5 for each point, you have made a profit of £5x10=£50.

However, it is vital to point out that traders need to know about the various risks of going short. The main problem is that the amount that the price of the market can rise to is limitless, and therefore if you fail to place stops appropriately, you could face enormous losses.

To demonstrate this, let's take a look at a Microsoft trade scenario that didn't go so well.

An Unsuccessful Trade On Microsoft – Going Long

Imagine that Microsoft currently has a spread of 5202 : 5198.

You make the decision that you are going to buy at 5202 for £10 a point. However, a couple of days later you hear the news that a serious flaw in one of their operating systems' security has occurred. Suddenly, Microsoft share prices tumble and the spread moves to 5188 : 5185.

Immediately, you choose to close your position to try to cut your losses.

11230-11220=10

Since your bet was £10 a point, you made a loss of 10x10=-£800.

Therefore, you made a loss of £800.

Losing a trade is bad enough, however what's worse is the fact you had just £500 in your account and not just lost that amount, but you also now owe your provider £300 more that you never had to start with. You will probably soon receive a margin call from your provider telling you that you have to add more funds to your account or they'll be closing you out. No traders wants to ever receive such a call.

However, this example was completely preventable. The good news is that there are ways that you can protect yourself from risks like this. Our section entitled “Controlling Your Risk” on our Spread betting brokers website helps you to learn more about this.

Making Mistakes

No trader can get every trade right and risks are inevitable in trading the markets. You need to accept that some trades will lose and some will win, however by being diligent and carrying out research, you will be reducing the chance of losing a trade.

It makes sense to start out by practising with a free demonstration account which will enable you to get a greater understanding of the concept of spread betting. These kinds of accounts can simulate the trading experience, enabling you to create a securities portfolio then learn about how you can manage risks without spending any of your own money. Most of the best providers offer these free accounts, so try one out before you decide to invest in a proper trade to get a sense of how the platform works and how to best trade the markets.

Also in our ultimate guide to spread betting, it covers:

Shorting Stocks Example: How to short and bet on Deutsche Bank shares going down….

It's not very pleasant I know, but it's the markets. When a company is in trouble the vultures begin to circle.

I don't mean vultures, I mean hedgers, risk protectors, opportunists, trend hunters or just plain old traders.

Before I get into this I am not suggesting Deutsche Bank's share price is a one-way bet down. I'm just highlighting ways to short the stock and bet on it going down if DB continues to underperform.

But first here are three major risks of shorting Deutsche Bank stock.

First, if you are short your max profit is if the share price goes to zero. Your max loss is in theory unlimited. So if for example the company is bid for, then you can expect a significant rise in price and resulting loss.

Secondly, you can be forced to close your position off by your broker and the exchange.  If your broker has borrowed stock from someone else to hedge your short position they can be forced to give it back. So, if your broker is not prepared to have your short position unhedged they will close off it whether you like it or not. And even worse, this can be done at any price that is fillable.  Which is a nightmare if a stock is illiquid.

And thirdly, if the stock is suspended, which can happen when companies hit hard times - you could be asked to cough up 100% margin with no idea where the stock will come back to the market.

This isn't an exhaustive list of the risks in shorting Deutsche Bank stock, so make sure you do your homework first.

But if you do want to bet on Deutsche Bank stock going all the way down to China Town, here are three ways to do it with some pros and cons.

Short Deutsche Bank stock on a spread bet with IG

With a spread betting broker profits are tax-free as you bet a certain amount per point a share price moves. So for example, if you bet £10 a point (cent) that Deutsche Bank stock moves then you could potentially make £7,720 if it goes to zero. You'd have to cough up about £1,500 in initial margin and make sure you have enough money on your account for daily P&L margin.

Even though Deutsche Bank trade in Euros you can have a GBP position.

  • Pro - tax-free profits
  • Con - unlimited potential losses

You can compare spread betting brokers here

Sell Deutsche Bank stock as a CFD with Plus 500

Basically the same as a spread bet but instead of betting a £ per point you buy and sell a share equivalent as a CFD instead of owning the shares. Be mindful that your P&L will be in Euros though.

  • Pro - trade on leverage with margin
  • Con - trading on margin can significantly increase your losses and wipe out your entire account quickly

You can compare CFD brokers here

Buy a Deutsche Bank put option with Saxo Capital Markets

Buying a put option will give you the right to sell a certain amount of stock in Deutsche Bank at set price.

So taking an example from the below options chain on Deutsche Bank shares on SaxoTraderGo. If you buy some 7.6 January 2019 put options you will have the right to sell your Deutsche Bank at 7.6 even if the price is trading on the market at 6.  Of course, you don't have to wait till the option expires, you can sell your option position.  If the price has moved lower the intrinsic value of the option will have increased from 0.41. However, the closer the option gets to expiry the lower the time value will get.

You can read more about calculating the time value of an option here.

The risk with options is that you lose the premium that you paid and the option expires out of the money worthless.

  • Pro - limited risk
  • Con - can expire worthless

You can compare options brokers here

Please note that whilst writing this article I have decided to buy a couple of hundred quids worth of put options. I went for a slightly longer expiry and bought the June19 7.6 puts. I cannot stress more strongly that this is not a recommendation to trade. I am a hopeless trader. But today feels like a gambling day.  Maybe because I'm off to the races later with Spreadex at Sandown.

Position ticket below for your amusement...

Think a company is going bust? Here’s three ways to short a stock ( we'll use Facebook as an example plus highlight the risks involved).

Facebook has recently had it's hand slapped, for being naughty and as history has a habit of repeating itself (cough cough myspace, friends reunited) here are a few ways to take a short position on Facebook's share price going down.

If you think that Facebook's share price is going down then you can put on short position to profit from a falling market. Here's a quick guide to shorting Facebook stock, the risks, the potential rewards, they types of trading and the brokers that offer Facebook shorting.

What are the risks of shorting Facebook?

  1. Unlimited potential losses: The main risk is that share prices can go up indefinitely, but only down to 0. So in theory, if you are shorting Facebook stock you potential losses are infinite. Also, if the company is bid for or a takeover rumour emerges the share price will surge.
  2. Over leverage: Shorting shares is generally done on margin. Using leverage to trade means that you get exposure to more stock than funds on account. So for example, if the margin rate for Facebook is 10% you can short $10,000 worth of stock with only $1,000 on account. If the stock drops 50% you make $5k, but if it rallies, just 10% you've lost all your money.
  3. Currency Risk: Facebook is an American stock so there is a currency exposure. If the GBPUSD rate changes significantly, this can wipe out all your profits. You can avoid this through by trading a GBP position in a USD stock with a spread betting or CFD broker.

Potential rewards of shorting Facebook

  1. You can profit when the stock goes down. Shorting stocks, is not a new principle for UK investors. Spread betting and CFD trading have been around for years. Spread betting and CFD traders have been speculating on currencies, indices and stocks going up and down for decades. Shorting is of course an excellent tool for protecting long term investments against short term downtrends. But also provides a trade for short term speculation. It is risky though, so always make sure you understand the risks involved.
  2. Receiving income from overnight financing. When you trade on leverage there is an overnight financing charge for long positions. Most accounts are set to charge 2.5% over/under 1 month LIBOR (or thereabouts). What this means is that if you are long, you have to pay 2.5% plus the 1 month LIBOR rate to hold the position. But, if you are short you should receive the interest. In practice though (at the moment) interest rates are so low the short credit ends up negative so you check with your broker if you actually pay interest on short positions.

Different ways to short Facebook stock.

  • Spread betting - take a $ per cent bet on the stock. Spread betting is one of the most popular ways for private investors to short US stocks. Commissions are worked into the spread, so you just see one price. Profits are also tax free.
  • CFDs - are a contract for difference between the opening and closing prices of a trade. Spread betting tax benefits are unique to the UK so Europeans trade CFDs instead. CFDs are also useful for larger more tax efficient traders who want DMA (Direct Market Access) to get better pricing.
  • Options - this gives you the right to sell a certain amount of stock at a certain level in the future. You don't have to which is why it's called an option. If you think a share price is going down, you would buy a "put" which gives you the right to sell stock at a certain price. The price of a put will increase the further down the stock goes, allowing you to sell the put at a higher price and therefore making a profit on the options.