What is Going Short? Going Short Explained for Australian Traders

Going short means placing a trade that profits when an asset’s price falls — essentially the opposite of buying and hoping prices rise. Most Australian CFD brokers make this straightforward, letting you open a short position with a single click on any market, from the ASX 200 to gold or forex pairs.

How Going Short Works — A Practical Example

Imagine you believe the ASX 200 is overvalued and due for a pullback. It’s currently trading at 7,800 points, and you open a short CFD position worth A$10,000 notional exposure. If the index drops to 7,600 points — a fall of roughly 2.6% — your position gains approximately A$260 before costs.

Now flip the scenario. If the ASX 200 climbs to 8,000 points instead, your short position loses roughly A$256. Unlike a standard buy trade, losses on a short position grow as the price rises, so the risk is theoretically unlimited if the market keeps climbing. That’s why risk management tools like stop-loss orders are essential when shorting.

With most Australian CFD brokers, you don’t need to borrow the actual shares or index units — the broker handles the mechanics. You simply choose a contract size, set your stops, and execute. Keep in mind that holding a short CFD position overnight usually attracts a swap fee, which is a small daily cost that adds up over time.

Why Going Short Matters for Australian Traders

Going short gives Australian traders the ability to potentially profit during market downturns — something that’s not possible with a traditional share portfolio. When the ASX falls sharply, short positions on CFDs or futures can act as a hedge, offsetting losses in a long-term investment account.

Under ASIC’s current rules, retail Australian traders can access short positions via CFDs, but leverage is capped depending on the asset class — for example, major forex pairs are capped at 30:1, while individual equities are capped at 5:1. This means your margin requirement varies significantly by market. ASIC’s leverage limits exist specifically to protect retail traders from outsized losses, including on short trades that move against you. You can learn more about how margin requirements affect short trades in our guide to what is margin.

One underappreciated risk of going short is overnight funding costs. If you hold a short position for several days or weeks, swap charges accumulate and erode your profits. Brokers that are transparent about their swap rates make it much easier to plan your trade. Brokers that bury these costs in fine print can turn a winning trade idea into a losing one after fees.

Going Short vs Going Long

Going long simply means buying an asset and profiting when its price rises — the standard direction most investors think about. Going short is the mirror image: you profit when prices fall and lose when they rise. Both directions are available via CFDs with ASIC-licensed brokers. The key practical difference is that long trades have a maximum loss equal to your position size (a stock can only fall to zero), while short trades carry theoretically unlimited loss potential if prices keep rising. For most Australian traders, understanding the asymmetric risk of short trades is the more important factor to check before executing.

What to Check When Comparing Brokers

• Shorting availability across markets: Confirm the broker allows short CFD positions on the assets you want to trade — some platforms restrict shorting on less liquid stocks or exotic assets.
• Overnight swap rates on short positions: Short positions often have different swap rates to long positions. Ask for the broker’s swap schedule before you trade, or check the platform’s product specifications.
• Leverage limits by asset class: ASIC caps leverage for retail traders, but the specific limit varies by instrument. Make sure you understand your required leverage and margin before going short on volatile assets like crypto or individual equities.
• Stop-loss and negative balance protection: ASIC requires all licensed retail CFD brokers to offer negative balance protection, meaning you can’t lose more than your account balance. Confirm this is in place, especially for volatile short trades. Brokers like Pepperstone offer full negative balance protection under their ASIC licence.
• Margin call policy: Know at what account equity level the broker will close your positions. Check our explainer on margin calls to understand exactly how this works before you short.

Trading CFDs carries significant risk. 70–80% of retail accounts lose money. ASIC regulated. We may earn commission via links.