Short Selling
Short selling is a strateg where investors try to profit from a falling share price by selling borrowed shares and buying them back later at a lower price.
Quick Reference:
Sell first, buy back later. Profit if price falls. Losses can be unlimited.
Typically used by hedge funds.
Expanded Explanation:
Normally, you buy shares first and sell them later to make a profit. Short selling flips this idea. An investor borrows shares from a broker and sells them at the current price. IF the stock falls, they buy the shares abck at the lower price, return them to the broker and keep the difference as profit.
The risks are extreme. If the stock rise, the investor must still buy the shares back, but now at a higher price. This means losses can, in theory, be unlimted. Short selling is a tool mostly used by professional traders rathet than beginners. For new investors, it is enough to know that short selling exists, but it carries high risk and is not beginner friendly at all.