Traders who speculate on an upcoming decline often short sell stocks. But you can also use short selling to balance portfolio allocations and manage risk. This is one of the reasons why you need the best brokers for short selling.
When you sell shares short, you borrow the shares from your stockbroker, then sell the borrowed shares in the market and leave a short position open. You close out this short position by buying back the previously sold shares, hopefully for a profit.
As a short seller, you profit by buying back the shares sold at a lower price and making up the difference between the selling price and the buying price on each share. If the stock goes up, you end up paying a higher price for the short stock and incur a loss. Short selling also has important rules.
Not all brokers are created equal, so think carefully about your needs before you open an account and start investing. gand started now with our recommended brokers.
Want to skip straight to the best? Our readers love CenterPoint Securities for short selling.
Short Selling Brokers at a Glance:
Best brokers for short selling
Here is a list of Benzinga’s favorite brokers for short selling.
TradeZero won the Benzinga Global Fintech Award for the best brokerage for short selling in 2020 and 2021. TradeZero offers free limit orders and marketable orders, including market orders and marketable limit orders, costing only $0.005 per share.
TradeZero also offers 6:1 intraday equity leverage. The 6:1 day trading leverage allows traders to maximize day trading opportunities in the market. You can get 2:1 leverage on overnight positions.
Global Global Broker for Short Selling
2. CenterPoint Securities
CenterPoint Securities is a brokerage that offers outstanding tools for intermediate to advanced traders, high volume traders, momentum traders and short sellers. When you short sell with CenterPoint, you can take advantage of massive short inventory and advanced order routing to get your orders processed as quickly as possible.
Discounts are offered to active merchants and the customer service team is very responsive. Try a Pro, Web or Mobile account, use the built-in scanners, custom alerts and short location tools so you can make smart decisions and stay on top of your wallet.
3. Cobra Trade
Cobra Trading is the go-to broker for short selling with its exceptional loan access and direct access routing. Cobra gives you the opportunity to take advantage of the best market opportunities. The broker has been in business for almost 20 years and retains the advantages of a small business.
Cobra Trading exclusively opens and manages active trading brokerage accounts above $25,000. Cobra allows you to trade in a way that a “free broker” cannot.
Short sale over $25,000
4. Interactive Brokers
Interactive Brokers is the premier broker among active traders looking to sell short. Their platform includes the IBKR Securities Loan Borrow (SLB) system, which provides short sellers with vital information on the availability of short securities such as the amount available, the number of lenders, and current and indicative borrowing rates. historical. Advanced traders can even upload a bulk request text file to search for the availability of multiple short securities at once and download prepared lists of short securities grouped by country.
Active and global traders
5. Trade Station
TradeStation’s platform was only best for professional traders who needed a highly technical platform. Now, with TradeStation’s new TS GO account option, you’ll have access to professional-grade stock screeners and plenty of training and development tools to help them grow as investors.
Get up to $2,500 bonus cash
6. TD Ameritrade
Award-winning broker TD Ameritrade is ideal for short sellers.
In addition to a huge community of investors and traders, the broker provides web, mobile and downloadable platforms suitable for traders of all experience levels.
$600 cash and free exchanges for 60 days
Webull is a mobile app-based brokerage firm that offers commission-free trading in stocks and exchange-traded funds (ETFs). It is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Intermediate Traders and Investors
Moomoo is a commission-free mobile trading application available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it is backed by venture capital affiliates of Matrix, Sequoia and Tencent (NASDAQ: FUTU).
9. Charles Schwab
If you are looking to sell short, Charles Schwab has one of the most comprehensive platforms available.
Users can build a comprehensive and diverse collection of assets without paying the fees of buying individual stocks on your own. Charles Schwab also offers more than 4,000 commission-free mutual funds, a selection comparable to that of its competitors. When it’s time to sell short, users can take advantage of the platform to act quickly and seize unique opportunities where short selling may be the only option.
While accounts with Charles Schwab usually come with a $1,000 account minimum, the brokerage firm frequently runs promotions that offer to waive this minimum.
While buying ETFs and mutual funds is free for self-directed clients, it’s important to note that traders are subject to fees when buying or selling individual stocks and options with the help of of a broker, especially when selling short.
$500 bonus when referred to Charles Schwab
Short selling and its importance in day trading
Short selling plays an important role in the liquidity of stock Exchange. If a stock becomes overvalued according to the market, then short sellers borrow stocks sell the stock down, which align share prices with their fair value.
Jhe practice of short selling combines the views of bulls and bears to arrive at a fair price for the stock. Short selling offers other advantages to the market, including greater liquidity, which increases opportunities for short-term traders like scalpers and day traders.
Greater liquidity also leads to tighter bid/ask spreads which reduce overall costs for active day traders. In addition, the short sale of shares increases capital formation and reduces the likelihood of bubbles and hangs due to increased efficiency and more accurate prices in the market.
When it comes to large investors, fund managers allocate funds efficiently and hedge against long-term investment strategies. In combination with futures and options, short stocks could be incorporated into many highly profitable day trading strategiesincluding arbitrage and momentum trading.
What to look for in a broker for short selling
The best brokers for short selling usually have either a large stock inventory via their customer pool or access to a stock lender who could supply the stock for short sellers.
Here are some other things to consider:
- Most major stockbrokers can obtain considerable amounts of stock per their major institutional clients and have entire departments dedicated to facilitating stock lending.
- Smaller and less capitalized brokers may not be able to provide all short stocks and may therefore impose restrictions on short selling.
- If you have limited assets, also consider broker’s margin account. You need a margin account to borrow stocks from a broker. Shareholders and traders typically allow the broker to borrow their shares and other assets as collateral against existing margin debt balances, and this is one of the primary ways brokers borrow shares. For example, Charles Schwab can borrow stocks worth up to 140% of the amount of a client’s margin account debit balance, but cannot borrow securities that are settled and paid for in full.
- An interface you understand makes the investment journey much easier. If you’re spending your money somewhere that confuses you, it’s only a matter of time before you make a mistake or miscalculate your investment.
Start short selling today
Learn the unique rules of short selling and find a trusted broker to help you navigate the market. Our recommended brokers can help you short sell and offer educational support. From eTrade short selling to Moomoo, Interactive, Schwab and more, you can test the market, learn how to short sell and diversify your portfolio.
Take advantage of the benefits of liquidity and start shorting today.
Frequently Asked Questions
Are there risks of short selling?
The risk of short selling is that the stock price goes up and you have to cover the position at a higher price (take a loss).
What is the role of brokers in short selling?
Brokers act as an intermediary that allows you to borrow stocks and they charge you interest.
Where can I find credible brokers for short selling?
You can find a list of brokers recommended by Benzinga for short selling in the list above.