Plain-English definitions, reviewed by an independent investor
Short Selling
Short selling borrows shares to sell now, hoping to buy them back cheaper and pocket the difference.
Short selling borrows shares to sell now, hoping to buy them back cheaper and pocket the difference.
Profit = Sale Price − Lower Repurchase Price
Why it matters
It is the main way to profit from a falling price.
Common confusion
Losses are theoretically unlimited if the price rises instead of falling — the opposite of owning.
Frequently Asked Questions
Why is shorting risky?
A stock can rise forever, but your loss is capped only by going broke.
What is a short squeeze?
Forced buying by shorts as price rises, accelerating the climb against them.