One way to make money on stocks for which the price is falling is called short selling (or going short). Short selling is a fairly simple concept—an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender.
Do you make money when a stock goes up?
If you hang onto a stock that has gone up in value, you have whats known as unrealized gains. Only when you sell the stock you can lock in your gains. Since stock prices fluctuate constantly when the market is open, you never really know how much youre going to make until you sell.
Who makes money when the stock market goes down?
If the stock price falls, the short seller profits by buying the stock at the lower price–closing out the trade. The net difference between the sale and buy prices is settled with the broker. Although short-sellers are profiting from a declining price, theyre not taking your money when you lose on a stock sale.