The typical way investors make money off stocks is simple. They buy a stock with the anticipation that its price will rise over time, and if it does, sell it later for a profit. This is considered “going long.”
But stocks don’t have to go up for investors to make money off them. Investors also can profit if the stock price falls — and this is the infamous short sell.
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Short selling is when a trader borrows shares and sells them. They’re hoping the price will fall after so they can buy them back for cheaper.
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Shorting can help traders profit from market downturns and protect themselves from losses. It can be very risky, however.
Short selling a stock is when a trader borrows shares from a broker and immediately sells them, expecting…
