Before we tell you how to short sell in Zerodha Kite, it is important to know what ‘short selling’ is.

All of us know, we have to buy something first before we sell it.

But in the stock market, you can sell first and buy it back later.

Confused? Let us take an example.

The price of one share of Reliance has gone up a lot in the last few months. You feel the share price is about to fall.

The current price is ₹ 2000. You sell one share for that price. A few hours later, the price of the share falls to ₹ 1980.

You exit your trade by buying Reliance.

You sold for ₹ 2000, you bought it back for ₹ 1980. Your profit is 2000 – 1980 = ₹ 20.

Simple?

Do note, you do not need to have shares with you to sell it. Without having shares in your demat account, you can still sell first and buy it later.

It is exactly the opposite of buying first and selling it later.

There is one difference though. In the cash market, when you buy shares – you can keep them in your demat account.

However, when you sell shares – you need to buy them back on the same day before the market closes. In other words, ‘short selling’ is only allowed for intraday trades.

It is possible to short for long-term in ‘futures and options’, but we will not go into those details in this article.

Back to the question:

How to short a stock in Zerodha

You can either follow the step by step instructions mentioned here or watch the live example video below – where I actually execute a ‘short sell’ trade on Zerodha Kite.

Steps:

  • Open the Zerodha Kite app in your mobile phone.
  • Go to the ‘Watchlist’ section and add the name of the stock which you want to short sell.
  • Click on ‘Sell’.
  • Enter the number of stocks you want to sell in ‘Quantity’.
  • Click on ‘MIS’ (which means Intraday).
  • There is no need to change anything else.
  • At the bottom of the screen, Kite will show you the approximate margin required to place the order.
  • Make sure you have the necessary funds deposited in your account.
  • ‘Swipe to Sell’.
  • That’s it.

After placing the Short Sell order:

  • Go to ‘Orders’ tab to see if your ‘short sell’ order has been processed successfully.
  • If it has, next go to ‘Portfolio’ tab and click on ‘Positions’.
  • Here you will see the current profit or loss.
  • If the price falls, you will be in profit.
  • If the price rises, you will be in loss.

Closing the position:

  • Remember, your order has to be closed on the same day – before 3:20PM Indian Time.
  • When you decide to close your short sell position, go to ‘Portfolio’ and then click on ‘Positions’.
  • Click on the name of the company you shorted.
  • Then click on ‘Exit’.
  • That’s it. Your first ‘short sell’ trade is complete.

The best way to understand ‘short selling’ is to first try placing one order. Choose any stock and sell it first.

Then observe your profit or loss in ‘Positions’.

If the price rises higher, you will notice you are in loss. This is exactly the opposite of buying first, because when you buy first – you will be in profit if the price rises.

If you want to short sell for a longer period of time, the only way is to sell in ‘Futures’. More on that in another article.