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So you want to get into shorting stocks, huh? You’ve come to the right place. This post will give you a crash course on the basics of shorting stocks, and short locates: what they are, how to get them, and why they’re essential. Let’s get started!


What is a Short Locate? 

A short locate is simply an order to borrow shares of a stock that you hope to sell (or “short”) at a higher price and then buy back at a lower price so you can profit from the difference. When you sell a stock “short,” you’re essentially betting the stock price will go down. 

Why do you need to borrow the shares in the first place? 

Well, to sell a stock, you need to own it. But if you think the stock price is going down, you don’t want to own it—you want to bet against it. Borrowing the shares will let you do just that. 

How Do I Get a Short Locate? 

To submit a short sell order, your broker must confirm that the shares are available for borrowing—and that’s where the short locate comes in. Your broker will contact the party who owns the shares (usually another broker) and request to borrow them. If everything checks out and the shares are available for borrowing, your broker will give you the green light to proceed with your short sale. 

Why Are Short Locates Important For Shorting Stocks? 

Aside from being a necessary step in short selling, short locates can also provide helpful information about the supply and demand for a particular stock. If many locates are already out for a stock, there’s high demand for it. That could mean the stock price is about to go up (more on that later). On the other hand, if very few locates are outstanding, it could indicate that there’s not much interest in the stock, which could mean the price is about to go down. 

In conclusion, short locates are vital because they

  1. Let you borrow shares so you can sell them without owning them.
  2. Provide helpful information about supply and demand for a particular stock. Now that you know all this, what are you waiting for? 

Watch this free 1-hour webinar with Alex and learn how he makes millions yearly shorting stocks.

About the Author
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Joe Kelly

Joe Kelly is a versatile entrepreneur with a passion for day trading, product design, and real estate investing. As the creator of My Investing Club's flagship course, the Day Trading Jumpstart Accelerator, Joe has made a name for himself in the financial world since he began trading the market in 2015. Specializing in options, large cap day trading, and swing trading, Joe possesses a wealth of knowledge and experience in small cap stocks, which was his primary focus for the first five years of his trading career. This expertise has led him to mentor countless individuals, sharing his insights and strategies for success. When Joe is not busy making strides in the financial sphere, he can be found cooking up some of the most delectable steaks and smoking mouth-watering, Texas-style BBQ. A man of many talents, Joe enjoys playing guitar and woodworking in his spare time. Family and outdoor activities play a significant role in Joe's life. He loves spending quality time with his wife and children, engaging in a wide array of outdoor pursuits such as fishing, bike riding, hiking, swimming, skiing, tubing, and volleyball. Joe's enthusiasm for everything outdoors and his diverse range of interests make him a well-rounded individual, both in the professional and personal realms.