Advanced Concepts

How Short Selling Works

Short selling is one of the most misunderstood concepts in the market. When you short a stock, you're betting that the price will go down. Here's how it works: you borrow shares from your broker and immediately sell them at the current price. If the price drops, you buy the shares back at the lower price, return them to the broker, and pocket the difference. Sounds simple, but there's a catch: your losses are theoretically unlimited. If you buy a stock, the most you can lose is 100 percent. But