If a trader believes that the price of an asset will not rise but fall, he can still make money on it by ‘shorting’ it.

To do this, he borrows some of the assets in question, say some shares, from a long-term holder, such as a pension fund, and commits himself to returning them at an agreed time. He then sells them on, and is now ‘short’: he sold something he did not own and will – at some point – have to buy it back to return to its owner.

Ideally, by the time he needs to do this, the price will have fallen. If so, his profit will be the difference between the price at which he first sold the shares and the price at which he bought them back.

If he gets it wrong and the price rises instead, he’ll have lost money on the deal.

• Watch Tim Bennett’s video tutorial: Why are short-selling ban won’t work.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12