How can I sell wood and I do not own it?

Well .. you will borrow it ..
When you come to believe that the price of wood will decline after a while, you will go to a wood dealer and ask him to lend you tons of wood to be returned to him after a week, for example ..
If you agree, you will take the tons of wood that you borrow and you go to the market and sell it for $ 2000, now you have $ 2000 but you are required to return tons of wood to the merchant who lent it to you.
Well, you will wait a while and when the price drops to $ 1000 as you expected, you will go to the market and buy a ton of wood for $ 1,000 and then return it to the merchant, leaving you $ 1000 net profit for you.
What if the price of wood rose instead of falling?
If you assume that the price of a ton is $ 3000, it means that in order for you to return the ton you borrowed, you have to buy it at $ 3000 but you only have $ 2000, so you have to add $ 1,000 to make up the difference to return the wood you borrowed.
When you start selling, all I have to do is to lower the prices so you can buy at a price below the selling price.
As we have said, profit can only be achieved if the selling price is higher than the purchase price. What is the most important arrangement? At the end of the deal, the price at which you sold the commodity is higher than the price you bought.
From this example you can see that profit can be achieved in the bullish and bearish markets. The important thing is to believe your expectations .
In the financial markets, the term LONG is called when the transaction begins to buy and the term SHORT is launched when the transaction begins to sell.
You can count LONG as a purchase and SHORT means selling.
Why do not we apply what we have learned now to trade margin?
You know that there is no difference between trading a commodity in the traditional way and trading it with a margin system. Only in the margin system will you pay only a fraction of the value of the commodity you will trade.
Let’s go back to the example of the previous cars and we will trade margin in the case of the market and the falling market.
Remember that the agency we deal with will deduct $ 1000 as a user margin for each car we decide to trade, and remember that our account with the company is $ 3,000.
In the case of the bullish market
Suppose that the price of one car now is $ 10,000. Suppose that by following the car market, we are convinced that car prices will rise in the coming period, so we will think about buying a car in the hope that we can sell at a higher price later.
We will buy 1 lot from the car dealership ie we will buy one car since the lot = a car worth $ 10.000.
The auto dealership will deduct $ 1000 from our account as a margin of user who will be refunded after the completion of the transaction. The remaining $ 2,000 will remain in our account, which is the maximum amount that we can lose in this transaction.
Suppose that after we bought the car, the car prices dropped to $ 9000. If we sold the car at the current price, we would have to add $ 1,000 from our pocket to supplement the car that we bought from the agency at $ 10,000.
But we will not sell and we will wait ..
Yes .. Suppose the prices went up quickly and the price of the car was $ 12,000.
If we sell the car at the current price we will be able to pay the full value of the car and will remain $ 2000 are our profit from the deal.
We will decide to terminate the deal and we will order the agency to sell the car at $ 12,000, the agency will implement the order and will deduct the value of the car that asks us is $ 10,000 and the remaining $ 2000 gain will add to our account after the return of the margin used.
Our account will have = $ 5000.
Thus, the profit we achieved:
Profit = Selling Price – Purchase Price
= 12,000- 10,000 = 2000 $
In the case of the falling market
Suppose the price of the car is now $ 10.000 but from our follow-up to the market we have come to believe that car prices will fall in the coming period.
We will consider selling a car at the current price to buy back at a lower price later.
Of course we do not own a car now, so we will borrow it from the car dealership and we will order it to sell it immediately in the market at the current $ 10,000 price.
The agency will implement the order and will deduct from our account $ 1000 margin of a user. Whether we bought the car or a car, we started a deal and we are required to pay the full value of the car in case of purchase or return the car in case of sale.
There will be $ 2000 left in our account as margin available, and we are now required to return the car we borrowed.
If we imposed after the sale of the car rose car prices and became the price of the car = $ 11 thousand.
This means that if we decide to buy a car at the current price we will have to add $ 1000 from our pocket. We sold the car for $ 10,000 and the car now = $ 11000 so that we can return it to the agency. We need to add $ 1000, which will be deducted from our account with the agency.
But we will not do .. we will wait ..
Yes, car prices have fallen and the price of the car has become $ 8,000. If we decide to buy a car now to return it to the agency, we will pay $ 8,000 and we have $ 2000 of the price we sold.
We will do this and we will order the agency to buy a car, the company will execute the order and will pay $ 8000 and will remain $ 2000 will be added to our account after the refund margin used and will become our account = $ 5000
Thus, the profit we achieved:
Profit = Selling Price – Purchase Price
= $ 10,000 – $ 8000 = $ 2000
Thus, in trading margins like trading in the traditional way can always make a profit in the market up and down and it is important to believe our expectations.