So leverage magnifies your losses as well as your returns. Interest was not considered in the above example. For an investor who is leveraged to show a profit the security must rise at least over the cost of borrowing. If the market price drops below a certain threshold, the broker may require you to deposit additional money or liquidate a portion of your holdings. The negatives aside, margin can be a useful tool for aggressive investors, when the risks and rewards are well-understood.
Timing is critical.
See for example, the behavior of the Jakarta Growth Fund. and the Templeton Emerging Markets Fund. If you sell them at a higher price, and buy back later at a lower price you make a profit. The requirements for short selling may vary with brokers, however, you will have to deposit funds or securities to make sure you have the capacity to buy back the shares or cover your short position. In some cases, you may be forced to cover, if the broker has to return the shares he lent you. This is especially of concern with thinly traded, illiquid stocks.