How can I make sure that my losses are limited to the funds in my account?

CHANGE ACCOUNT TYPE

As selling short involves borrowing (of stock rather than cash) and poses unlimited risk (as there is no limit as to how high the stock price may increase when the position is eventually closed), a "Margin" type account is a prerequisite to entering orders to sell short…

Procedurally, to sell short, all you need to do is specify your order Action as 'Sell' at the point you create your order. Note that we do not allow you to be both long and short the same security, so if you maintain a long position and enter a sell order, you will close out any long positions to the extent of your sell order and open a short position to the extent, if any, your sell order exceeds a long position. Please note that you must maintain a "Margin" type account with net liquidating equity of at least USD 2,000 for a short sale order to be accepted. Short sales are not allowed in "Cash" type accounts…

A Short Sell order will be accepted and can possibly trade if you have a margin type account and there is sufficient Available Funds to meet any change in the account's margin requirements. If If you do not want the ability to sell short, you would need to have a Cash type account as Cash accounts cannot borrow shares of stock to naked short sell, be short naked Call options or short non-cash secured Put options. Cash accounts are restricted from holding a short balance in any currency as this would also constitute a loan from IBKR…

A Long stock position has to be held more than a one year period before a closing trade would be considered a Long Term profit gain or loss.  If you sold a long stock position that you owned for less than one year it would be considered a Short Term gain or loss.  Any Short stock position you hold is borrowed therefore it is always considered to be a Short Term Gain or Loss regardless of when it was opened and then closed…