Benzinga readers often choose CenterPoint Securities or TradeZero as the best brokers for short selling.
Day traders who speculate on an upcoming decline often sell stocks short. But you can also use short sales to balance portfolio allocations and manage risk. That’s one reason why you need the best brokers for short selling.
When you sell stocks short, you borrow the stock from your stockbroker, then sell the borrowed stock in the market and leave an open short position. You close that short position by repurchasing the previously sold stock, hopefully for a profit.
As a short seller, you profit by buying back the sold shares at a lower price and making the difference between the sale price and the purchase price on each share. If the stock goes up, you wind up paying a higher price for the short stock and take a loss. Selling short also has some important rules.
Not all brokers are created equal, so carefully consider your needs before you open an account and start investing. Get started now with our recommended brokers for shorting a stock.
Quick Look at the Best Brokers for Shorting:
1. Best for Active and Global Traders: Interactive Brokers
Interactive Brokers is the premier broker among active traders who are looking to sell short. Their platform features the IBKR Securities Loan Borrow (SLB) system, which provides short sellers with vital information about the availability of shortable securities such as the quantity available, number of lenders, and both current and historical indicative borrow rates. Advanced traders can even upload a bulk request text file to search for the availability of multiple shortable securities at once and download prepared lists of shortable securities grouped by country.
- There are several unique, branded trading tools on IBKR that make investing that much easier
- You can upload bulk request files if you want to see current availability
- Low trading fees
- This platform has all the tools you need as an advanced trader, but it may be so massive that certain investors could feel overwhelmed
- You need at least $10,000 to earn interest for your portfolio
2. Best for Day Traders: CenterPoint Securities
CenterPoint Securities is a brokerage firm that offers remarkable tools for intermediate to advanced traders, high-volume traders, momentum traders and short sellers. When you short sell with CenterPoint, you can take advantage of a massive short inventory and advanced order routing so that your orders process as quickly as possible.
There are discounts available to active traders, and the customer support team is very responsive. Try a Pro, Web or Mobile account, use the built-in scanners, custom alerts and short locates tools so that you can make wise decisions and stay on top of your portfolio.
- There are scanners that allow you to get the alerts and information you need as you make critical decisions
- The short location tool is helpful for those who need to quickly short a stock while they still can
- You can also leverage this platform for momentum and high-volume trading
- Less-experienced traders may feel as though there are too many choices to make, tools and options that get in the way of trading
- Expensive trading fees
3. Best for Cost-Conscious Traders: Moomoo
Moomoo is an intuitive investment and trading platform with pro-grade, easy-to-use tools, data, and insights, with a pro-level experience for investors of all levels.
When you sign up with Moomoo and open an account, you can access unique features, including:
- Real-time Level 2 stock and options market data for funded accounts
- Advanced technical indicators and charting tools
- Advanced order types
- Full extended trading hours from 4 AM to 8 PM EST
- Multi-market quotes
- Low fees, including $0 commission on U.S. Stocks or ETFs and $0 equity options contract fees
- 5.1% APY1 + Extra 3% APY2 (for 3 months) in the Cash sweep program (Offer ends in Jul 31, 2024)
New from Moomoo!
- For new and existing Moomoo users who haven’t deposited funds before May 29th, 2024. You can earn free stocks by depositing money before July 31st, 2024:
- Deposit $100 or more and get 5 free stocks.
- Deposit $1,000 or more and get 15 free stocks (better deal!).
- For new and existing Moomoo users who haven’t transferred stocks in before May 29th, 2024. You can earn a cash bonus by transferring your investments from a list of approved brokers (including Robinhood, Webull, Interactive Brokers) to Moomoo before July 31st, 2024:
- You get a 1.5% bonus on the value of your transferred assets, up to a maximum of $20,000.
- The bonus is paid as “Cash Rewards”.
You can reach out to the Moomoo customer support team either by phone during the trading day or via email. Users are also welcome to review FAQs in the Help Center for more information.
The site also helps users learn more about trading through an expansive educational resource offering, provides many pro-level research tools, and features an active global community with 20M+ users worldwide.
- Commission Free trading
- 6.8% margin rate
- 8.1% APY in the Cash Sweep program for new and qualified customers (ends in July 31, 2024)
- Free Level 2 data for funded brokerage accounts
- Advanced charting tools
- Extended trading hours
- No minimum deposit
- 24/7 chat support
- Does not support Crypto
- No support for retirement accounts or mutual funds
4. Best for Day Traders and Scalpers: Guardian Trading
Guardian Trading offers speedy execution, cost efficiency and a quality environment for active or experienced investors. The real-time access on the site comes with short locates and overnight borrows. With sponsored access, you’re using Guardian to choose the venue where you wish to buy, sell or execute trades. Offering flexibility, seamless trading, short-selling, overnight borrowing and more, you can use their suite of tools to build a strong portfolio.
Other tools include the stock locate system, cutting-edge clearing, quick execution and competitive securities lending programs that work well for day traders, scalpers, momentum traders and more.
- In-house tools make it easier for you to get accurate, timely and actionable information
- Guardian helps you find the best short selling options without confusing the process
- You can adapt your trading strategy to this platform rather easily
- Newer traders may want to learn about investing elsewhere before signing up for Guardian
5. Best Overall Brokerage for Short Selling: TradeZero
TradeZero won the Benzinga Global Fintech Award for Best Brokerage for Short Selling in 2020, 2021 & 2022. TradeZero offers free limit orders and marketable orders, including market orders and marketable limit orders, which only cost $.005 per share.
TradeZero also offers 6:1 intraday leverage on equity. 6:1 day trading leverage allows traders to maximize day trading opportunities in the market. You can get 2:1 leverage on overnight positions.
- The firm has been lauded many times over for the services it provides to traders, especially short sellers
- Low costs allow you to better reinvest in your portfolio
- The platform has been simplified to ensure that traders can easily navigate and make decisions
- Leverage options change from day to night, meaning some investors may be confounded by how to enter and exit certain positions
- High transfer fees
6. Best for Short Selling Over $25k: Cobra Trading
Cobra Trading is the go-to broker for short selling with its exceptional access to borrows and direct access routing. Cobra gives you the ability to take advantage of the best opportunities in the market. The broker has been in business for nearly 20 years and maintains the perks of a small firm.
Cobra Trading exclusively opens and services active trading brokerage accounts above $25K. Cobra allows you to trade in a way that a “free broker” cannot.
Open a Cobra Trading account and get:
- 33% discount on equity commissions for life: This significantly reduces your trading costs.
- Free access to trading software for one month: Choose from DAS, Cobra Trader, or Sterling to help you analyze and execute trades (although keep in mind this is only free for one month).
- The broker is nearly 20 years old, giving you far more expertise and know-how than you would have expected
- You can access borrows so that you can make wiser decisions
- While this platform is a little pricier, it gives you what discount brokers cannot
- You must trade with $25k on this platform, which means many investors may want to save up before they consider opening an account here
- Cobra is not a self-clearing brokerage
7. Best for Intermediate Traders: TradeStation
TradeStation’s platform used to only be best for professional traders who needed a highly technical platform. Now, with TradeStation’s new TS GO account option, you’ll have access to professional-grade stock screeners and extensive educational and development tools to help them develop as investors.
- The TS GO account allows you to work like a professional on the trading floor
- The level of technical information is rather high compared to the cost of the platform
- Educational tools make it easier for you to study, learn on the go or map out a new trading strategy
- Low trading fees
- This platform may not have the tools you prefer, even though it offers quite a bit of technical information
- Mutual fund fees
8. Best for Active Traders: Webull
Webull is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
- Because the platform is well-regulated, you know it’s a safe place to invest
- You can invest in a range of assets outside of your normal short selling strategy
- The platform offers quite a lot of information for those who plan to learn short selling while on the site
- No inactivity fees
- Webull may not work for all professional traders because it has an interface that looks more toward the average investor
- No mutual funds
Importance in Day Trading
Short selling plays an important part in the liquidity of the stock market. If a stock becomes overvalued according to the market, then short sellers borrow shares to sell the stock down, thereby aligning stock prices to their fair value.
The practice of short selling combines the opinions of both bulls and bears to arrive at an equitable price for stock. Short selling provides other benefits to the market including greater liquidity, which increases the opportunities for short-term traders like scalpers and day traders.
Remember, the share price that you hone in on is not stable. You’re likely not operating as a market maker and you’re not running a hedge fund. However, you know that there’s a specific market price at which you’re willing to short.
More liquidity also leads to tighter bid/offer spreads that reduce overall costs to active day traders. In addition, shorting stocks increases capital formation and lowers the likelihood of bubbles and crashes due to the increased efficiency and more accurate pricing in the market.
With respect to large investors, fund managers allocate funds efficiently and hedge against long-term investment strategies. In combination with futures and options, shorting stock could be integrated into numerous highly profitable day trading strategies, including arbitrage and momentum trading.
How to Choose
The best brokers for short selling typically either have a large inventory of stock through their pool of customers or access to a stock loaner that could provide the stock for short sellers.
Here are a few more things to look into:
- Most large stockbrokers can obtain considerable amounts of stock through their big institutional clients and have whole departments dedicated to facilitating stock loans.
- Smaller and less capitalized brokers may not be able to provide every stock to short and therefore may put restrictions on short sales.
- If you have limited assets, also consider the broker’s margin account. You need a margin account in order to borrow shares from a broker. Stockholders and traders generally allow the broker to borrow their stocks and other holdings as collateral for existing margin debt balances, and that is one of the main ways brokers borrow stock. For example, Charles Schwab can borrow stock worth as much as 140% of the debit balance amount from a client’s margin account but can’t borrow securities that are settled and paid in full.
- An interface you understand makes the investment journey that much simpler. If you’re spending your money in a place that confuses you, it’s only a matter of time before you make a mistake or miscalculate your investment.
Frequently Asked Questions
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The risk of short selling is that the stock price goes up and you must cover the position at a higher price (taking a loss).
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Brokers serve as middlemen that allow you to borrow shares and they charge you interest.
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You can find a list of Benzinga’s recommended brokers for short selling on the list above.
