If I sell a stock that I don't have, am I required to buy it before a certain amount of time?
I'm just began playing in the stock   market. I assume you mean that you're not using real money, but rather you have an account with a stock simulator like the one Investopedia offers. I am hopeful that's the case due to the high level of risk involved in short selling like you're describing. Here is another post about short selling that expands a bit on that point. To learn much more about the ins and outs of short selling I will point again to Investopedia. I swear I don't work for them, but they do have a great short selling tutorial.  When you short sell a stock you are borrowing the stock from your broker. (The broker typically uses stock held by one or more of his clients to cover the loan.) Since it's basically a loan you pay interest. Of course the longer you hold it the more interest you pay. Also, as Joe mentioned there are scenarios in which you may be forced to buy the stock (at a higher price than you sold it). This tends to happen when the stock price is going against the short sell (i.e. you lose money). Finally, did anyone mention that the potential losses in a short sell are infinite? "If you sell a stock you don't own, it's called a short sale. You borrowed the shares from an owner of the stock and eventually would buy to close. On most normal shares, you can hold a short position indefinitely, but there are some shares that have a combination of either a small float or too high a short position that shares to short are not available.  This can create a ""short squeeze"" where shorts are burned by being forced to buy the stock back.  Last - when you did this, you should have instructed the broker that you were ""selling to open"" or ""selling short."" In the old days, when people held stock certificates, you were required to send the certificate in when you sold. Today, the broker should know that wasn't your intention." I don't actually have any of this stock. Apparently, it's quite common strategy This is called naked short selling. It's not illegal per se, but there can be some major penalties so you should call your broker and ask them these questions. Intentionally naked short selling is not looked upon favorably. They'll probably try to recommend you a safer shorting system by which: Answers here are correct but I'll offer an extremely (overly) simple explanation that should help you in understanding the more detailed answers.  When most people own stock they do so through a broker.  Unless you jump through some hoops, the broker keeps the shares in the name of the brokerage.  This is called holding the stock in street name. When you sell short through a brokerage, the broker is letting you borrow a certain number of shares owned by someone else and sell them for cash now.  At some point, you need to repay this loan with the same number of shares you borrowed.  Ideally, you want the stock to drop to $0.  The reason you might be forced to purchase the stock is that the actual owner(s) of the stock want to sell.  If the broker has too many people wanting to sell, you will need to repay some of all of the loan (in shares) i.e. purchasing shares at the current market price.
There are a few reasons, dependent on the location of the company.  The first, as you mentioned is that it means that the employee is invested in the companies success - in theory this should motivate the employee to work hard in order to increase the value of their holdings. Sometimes these have a vestment period which requires that they hold the stock for a certain amount of time before they are able to sell, and that they continue working at the company for a certain amount of time. The second, is that unlike cash, providing stocks doesn't come out of the companies liquid cash. While it is still an expense and does devalue the shares of other shareholders, it doesn't effect the daily working capital which is important to maintain to ensure business continuity. And the third, and this is for the employee, is tax reasons. In particular for substantial amounts. Of course this is dependent on jurisdiction but you can often achieve lower tax rates on receiving shares vs a cash equivalent sum, as you can draw out the money over time lowering your tax obligation each year, or other methods which aren't possible to look into now. Hope this helps. "Hello!  First of all, I think it's great you're asking the community for help.  Asking for help when you need it is a sign of strength and self-awareness of your own limitations (which we all have, even the smartest business people ask questions, in fact they ask the most questions).  I'm wrapping up year 2 of doing what you're trying to do and am finally seeing real traction. I am a bit older than you and started out on my own 7 years after grad school, but I have learned a lot and don't mind sharing.  Here's some things you might find useful.  * Never work for free (working for ""equity"" or working for ""exposure"" is working for free).  People who offer you this because you're just starting out are parasites looking to sell your talents but not pay for them.  The only thing you can take away from attempts to do this is that your talents are in demand, which is good!    * Never sell yourself short: would you rather do 10 websites for a $1000 each or do 1 website for $10000?  You'll be doing a lot of projects in the middle, but one very important thing to bear in mind is that one $10000 website is a lot less work and may make you the same amount of money (or more) overall.  * In the beginning, maybe you think you need to build a portfolio. But you'd be surprised how many prospects don't care what's in your portfolio and in fact never look at the portfolio, which leads me to the most important bit of advice:  * Learn to sell yourself.  YOU are your company's first and main product.  Learn to sell yourself (as the smart kid, future Fortune 500 CEO who stays up all night getting things done, etc)  * Always aim high in your proposals.  You'd be surprised how many people don't negotiate at all.  That being said, always put something in your proposal that is a good idea but it beyond what their asking for.  If they ask you to come down in price, remove this feature and come down a little bit.  * Develop an ability to read how interested a prospect is in your services before you spring the price on them.  At your age, I was waiting tables.  This helped me to be able to read a customer to determine which waiter they wanted me to be: the attentive one, the high class one, the friend, or the quiet servile.  Consider taking on a side job to help you develop this skill.  * As I said above, some prospects will sign on the line without negotiating.  You might even take two proposals with you into a meeting with a prospect, one priced high and one low, and present the version that matches their interests.  Go high if they need something ""right now"".  * Remember you are your company's first product.  This means also that your time is the company's first commodity.   Be open to other things.  I have a background in mathematics and am most capable as a software developer and a web developer.  But I also help other companies sell and support physical products not at all related to technology.  Because it's highly profitable, I do it.  * When you're a one person business selling your time at the highest price is the name of the game.  But growing your business will require the help of others.  I found it helpful to first network with other like minded people and split project money according to skill level and time commitment on a per project basis.  This will allow you to take on bigger projects.    * But growing the company will eventually require you to hire (or contract) someone at a far lower pay rate than what you're bringing in.  The laws of supply and demand require you to do this as a business person if you're to grow the business (so that the business has money beyond what you're being paid). This is where the extra money comes from: selling the time of others at a higher price than you're paying them.  Be conscious of this.  Everyone you work with is not going to be your friend.  * Make your website awesome.  It doesn't have to be a work of art, but let it reflect the seriousness with which you approach your customers' projects.  Make sure there are no grammatical errors.  Find a website of someone highly successful who's doing what you're doing and emulate it.  You don't have to have a portfolio starting out.  Your website is your first portfolio item, and if it's awesome, prospects will think you'll do the same for them.  Good luck!  I'm sure I'm not the only one here who thinks your early developed entrepreneurship is going to take you far." "What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment.  Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account.  Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe.  You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later.  Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock.  Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your ""cost basis"" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe.  Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost.  If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules." "If you are already invested in a particular stock, I like JoeTaxpayer's answer. Think about it as if you are re-buying the stocks you own every day you decide to keep them and don't set emotional anchor points about what you paid for them or what they might be worth tomorrow. These lead to two major logical fallacies that investor's commonly fall prey to, Loss Aversion and Sunk Cost, both of which can be bad for your portfolio in the long run. To avert these natural tendencies, I suggest having a game plan before you purchase a stock based on on your investment goals for that stock. For example a combination of one or more of the following: I'm investing for the long term and I expect this stock to appreciate and will hold it until (specific event/time) at which point I will (sell it all/sell it gradually over a fixed time period) right around the time I need the money. I'm going to bail on this stock if it falls more than X % from my purchase price. I'm going to cash out (all/half/some) of this investment if it gains more than x % from my purchase price to lock in my returns. The important thing is to arrive at a strategy before you are invested and are likely to be more emotional than rational.  Otherwise, it can be very hard to sell a ""hot"" stock that has suddenly jumped in price 25% because ""it has momentum"" (gambler's fallacy). Conversely it can be hard to sell a stock when it drops by 25% because ""I know it will bounce back eventually"" (Sunk Cost/Loss Aversion Fallacy).  Also, remember that there is opportunity cost from sticking with a losing investment because your brain is saying ""I really haven't lost money until I give up and sell it."" When logically you should be thinking, ""If I move my money to a more promising investment I could get a better return than I am likely to on what I'm holding.""" It definitely depends on the exchange you are trading on. I'm not familiar with Scottrade, but a standard practice is to fulfill limit orders in the order they are placed.   Most of the time, you wouldn't see stocks trade significantly under your bid price, but since penny stocks are very volatile, it's more likely their price could drop quickly past your bid and then return above it while only fulfilling a portion of the orders placed. Example 1. Penny stock priced at $0.12 2. Others place limit orders to buy at $0.10 3. You place limit order to buy at $0.10 4. Stock price drops to $0.07 and some orders are filled (anything $0.07 or higher) based on a first-come first-served basis 5. Due to the increase in purchases of the penny stock, the price rises above $0.10 before your order is filled ***EDIT*** - Adding additional clarification from comment section. A second example If the price drops from $0.12 to $0.07, then orders for all prices from $0.07 and above will start to be filled from the oldest order first. That might mean that the oldest order was a limit buy order for 100 shares at $0.09, and since that is above the current ask price, it will be filled first. The next order might be for 800 shares at $0.07. It's possible for a subset of these to be filled (let's say 400) before the share's price increases from the increased demand. Then, if the price goes above $0.10, your bid will not be filled during that time. "Do I have to pay the stock investment income tax if I bought some   stocks in 2016, it made some profits but I didn't sell them at the end   of 2016? You pay capital gains taxes only when you sell the stocks. When you sell the stock within a year you will pay the short term capital gains rate which is the same rate as your ordinary income. If the stock pays dividends, however, you will have to pay taxes in the year that the dividend was paid out to you. I bought some stocks in 2011, sold them in 2012 and made some gains.   Which year of do I pay the tax for the gains I made? You would pay in 2012, likely at the short term gain rate. I bought some stocks, sold them and made some gains, then use the   money plus the gains to buy some other stocks before the end of the   same year. Do I have to pay the tax for the gains I made in that year? Yes. There is a specific exception called the ""Wash Sale Rule"", but that would only apply if you lost money on the original sale and bought a substantially similar or same stock within 30 days. Do I get taxed more for the money I made from buying and selling   stocks, even if the gains is only in hundreds? More than what? You pay taxes based on the profit you make from the investment. If you held it less than a year it is the same tax rate as your regular income. If you held it longer you pay a lower tax rate which is usually lower than your regular tax rate." They are not required to fulfill the trade that they have intended to execute.  They are able to cancel or modify the trade at any point.  Example: This is how insiders are able to manipulate the price of shares through there buying and selling intentions.  A CEO would be able to disclose a buy order for a month from now, or whatever time period is required.  This would most likely increase the price of the stock as investors would see this as a good sign of company performance.  Up until the point when the buy order is scheduled to execute the CEO can then cancel the order and create a new sell order.  Since the stock is high in price, his new order is likely to make him money based on the manipulation from his trading intentions.   I am not an expert on the subject and only know as much as I do through personal research. Here is an interesting article about this kind of insider trading and manipulation:http://dealbook.nytimes.com/2012/12/10/the-fine-line-between-legal-and-illegal-insider-trading/?_r=0 The best thing to do is not worry about what time is best to buy but put in a conditional order before the market opens. If your conditions are met during the trading day your order will go through and you will buy the shares. This keeps your emotions out of your trading and will stop you from either chasing the market or buying when you consider the wrong time. As you have already done your analysis and made your decision before market open, thus you should place your conditional orders and stop losses before market opens as well.