Selling short reverses the process of buying and selling higher. When selling short you borrow shares and sell first hoping to buy back later at a lower price for a profit. Selling short goes against the long term trend in the stock market and has to be done when charts create the best chances that they are ready to reverse and go lower. 

Here are the best five setups for selling a stock or market short. 

Selling short when there is a follow through to the downside on a bearish candle after a gravestone doji. This shows that the chart has run out of buyers at higher prices and is reversing.

doji candle

Selling short a stock after a bearish head and shoulders chart pattern and breakdown under the right shoulder. 

How to short a stock

Selling short a stock after the loss of the 50 day moving average with the failure of a late stage price base.

How to sell stock short

Selling short a bearish double top chart pattern after the key support level in the pattern is lost. 

Above chart diagrams are from the book: How to Make Money Selling Stocks Short.

double top pattern

Chart courtesy of

Selling short the loss of the long term 200 day simple moving average on a chart. 

200 day moving average

Chart courtesy of

These are just some of the best short selling setups, you still must manage the trade for the opportunity for profitability. Trade management consists of a stop loss to keep a loss small if the chart reverses higher near the time of entry, a trailing stop will help maximize a winning trade if it keeps going lower, and a plan for locking in profits when a profit target is met or an exit signal is triggered in price or time. 

By Steve Burns

After a lifelong fascination with financial markets, Steve began investing in 1993 and trading his accounts in 1995. It was love at first trade. After more than 30 successful years in the markets, Steve now dedicates his time to helping traders improve their psychology and profitability. New Trader U offers an extensive blog resource with more than 4,000 original articles, online courses, and best-selling books covering various topics.