Long position is the purchase of securities to make money on an increase in their price.
Open long → the price went up → sold the stocks at a higher price → made money.
The price falls → you lose money.
Short positions allow you to make money at reducing the price of stocks. If you think a particular company's stock will fall in value, you can sell it. Then buy it cheaper and put the saved difference in your pocket. This will be your profit.
How to sell stocks you don't hold?
It's simple: you can borrow them from a broker for a certain commission and sell them on the market. Then buy it and return it to the broker. The trading platform does not require any additional complex actions from you.
1. Go to "Trade" tab → in the order placement section of Freedom Broker, click “Sell” instead of “Buy”.
2. In "Order settings" enable margin.
3. The platform itself sees that you do not have the number of stocks specified in the order and understands that you want to open a short position thereon. Borrowing stocks from a broker occurs automatically and very quickly.
EXAMPLE: you think Apple shares are overvalued and expect a weak report from the company. To make money on this event, you open a short position in AAPL shares - borrow 100 shares from the broker and sell them on the market for $120 per share. The company reports poorly, and shares drop to $100. You buy them and return them to the broker. Your profit was $20 per share or $2,000 per 100-share position. Minus the commission.