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Originally Posted by decoir
Sure, I understand that - but what about when someone tries to sell oil that he doesn't even have? If someone buys it, it's ok if the deal closes back with the same two people (because nothing need change hands), but what about if the buyer of the non-existant oil then moves the asset further along in some other direction?
I don't even know what I'm asking....
Basically if I have £10,000 how can I sell dollars, or euros, or anything other than pounds?
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LOL...It is hard at first to comprehend how you can sell something you don't have. However, your broker has access to dollars, euros, etc ...and you buy from, or borrow from, the broker.
Here's an investopedia definition of "Short Selling":
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The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.
For example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. If the stock falls in price, the investor buys it for less than he or she sold it, thus making a profit.
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