shorting - which prices apply?


4 0
I'm currently paper-trading a strategy which relies on shorting US stocks, but I'm unsure which prices to use to estimate real performance. Obviously when going long the buy is at the ask price and the sell at the bid price, but is the same true when shorting? After all you are borrowing the stock from the broker who presumably pays the ask price, but... [at this point my head starts to hurt]. Would someone with real-life experience of shorting like to advise; thanks.

I know I could ask the broker but I don't want to appear dim... I'm saving that for later.



Legendary member
8,395 1,170
Makes no difference whether you're going long or short.

You'll (normally) buy at the ask and sell at the bid.

Mr. Charts

Legendary member
7,369 1,185
If you are testing a methodology which involves opening a short, expect the fill price to be just below the best bid since you cannot short without an uptick. On most liquid stocks this is likely to be 1-2 cents below best bid on average. Make sure the stock has a tight spread.
On wider spreads it is possible to act as market maker and buy back on the bid.
Remember to have a statistically significant number of trades over a sufficient period of time to encompass all different marker types. Then having back tested, you must do a long series of walk forward tests to confirm the back tested results before you even start to think about risking one dollar.

Salty Gibbon

Experienced member
1,535 6
When shorting a stock and holding the position, what are the factors that determine whether a broker will unilaterally close out the position ?
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