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Long--You
buy securities – most common
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Short--You
sell securities that you do not own
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You
think the price of a security will fall
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The
Broker loans shares to you so you can sell
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them at the
current high price
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If the
price does fall, then you can buy these
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shares back at
lower prices and return the
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borrowed shares
to the broker.
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A
short can be risky since long-run trend in prices
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is up.
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