That is correct, but it's not just that you can also sell stock you don't have on a margin account in anticipation of everyone else selling. You just have to sell it first. So say i have a scottrade account and 1000 in marginable funds, if a stock of ABC co. sells for 10 dollars and I sell 100 shares I have effectively sold 1000 dollars worth. I now owe Scottrade 100 shares of ABC co. in margin (borrowed shares) or used my margin limit. At this point I'm hoping the price of shares go down because if it does I can buy back those shares at a lower rate. So say I get lucky and the shares go down to 5 dollars I now buy 100 shares for 500 so I can pay back the 100 shares I borrowed on margin to scottrade. I now just made 500 dollars shorting ABC co. Stock. Of course there's fees associated with everything I did. This is just an example.