Going short

According to my broker (Etrade), shorting a stock is only permitted while the price action is trending upward. Is this a general rule, or is it just Etrade?

General rule. It's to prevent drastic fall of a stock. If you could sell a stock in a downtrend, everyone will do so, dragging the stock to incredibly low values, where everyone will buy cover. Futures can be sold short in a down trend.

can someone give an example of how to short a stock? I though when you shorted it, you were just agreeing to buy it back later (at a cheaper price)

First you must have a margin account. Second, I noticed you use Ameritrade in another post so all you have to do is just sell the stock first. "sell short" order. Other brokers you have to make sure they have borrows first, but with Ameritrade if they don't have any shares to borrow they won't let you open the transaction. Ameritrade does not allow naked shorts. There must be a physical inventory When you are ready to buy it back later you use "buy to cover" order.

And hopefully the stock goes down, because if it goes up and you are short, well you lost money. Stops are still important on short plays to minimize risk.

This notion that you can only short sell stocks going up is false. As long as the alternative uptick rule is not in effect you can short stocks going up or down. Here is the list of stocks that currently fall under the uptick rule. (SEC Rule 201) Sometimes these stocks make upside moves while they are stuck on the list because traders have to short on the ask on pops (hence 'uptick' rule). Essentially gambling on a top only to be squeezed out later causing even more of a run. This is rare but does happen. Stocks will still go down while on the list and can be shorted if you sell short on those upticks. The rule is in place to help those with long positions exit before short sellers get in.

I have done some short selling before and don't care for it. Much easier for the government to do things like this week, stock runs on sale and you pick up some money. Now is a good time to get into the market with a good company, Coke my favorite. I use scottrade and this is from their web sight..

While most individuals invest in the market when they believe a stock's price will go up, some sell short because they believe it will go down. To sell short, investors open a margin account, borrow shares from their broker and sell the shares on the market. When the stock price decreases to a satisfactory level, investors cover the short position by buying the shares back (also called "buy to cover"). Their profit is the difference between the price at which they sold the borrowed shares and the price at which they repurchased the same number of shares in the market, plus the transaction costs and any additional fees.

between those 2 replys, I understand more clearly. What is the time frame to buy them back? (buy to cover)