Short Selling Contracts For Difference – Does the Uptick Rule Apply?

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Short Selling CFDs or Contracts for Difference can give you some fast gains but it can lead to some pretty unattractive results if you are not careful. Today we're going to take a look at whether or not the uptick rule applies to short selling CFDs.

What exactly is short selling?

Short selling is where you are looking to profit from a fall in the price of commodity that you are trading. It requires you to buy the stock first before buying it back to close the position. To many new traders this is a very foreign subject. The good news is that it is actually very easy to sell and that the whole process is much easier.

What is the uptick rule?

Prior to CFDs launching around the world, traders who wanted to sell a stock to a full service broker and the uptick rule did apply. The uptick rule simply means that to initiate a short position. So if the market was going down without going back up (even 1 cent) then you would miss out on the trade. Even more, since the uptick rule.

Trading CFDs has made the whole process that much easier. You can not wait for an uptick and you can see it's falling in value, which makes it much easier to profit from.

For those who are struggling to get their head around. Normally you would buy a stock at $ 1 with the hope that it will go to $ 2. With a short sale you are trying to sell it at $ 2 with the hope that it will go to $ 1 the 2 points.

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Source by Ashley Jessen

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