What is short selling in the stock market?

Short selling is a strategy used by investors to make a profit when they believe the price of a stock will decrease. 

They borrow shares of a stock and sell them at the current price. Later, they buy back the shares at the new, lower price and return them to the lender.

The difference between the selling price and the buying price is their profit.

Contrary to investors who aim to hold onto stocks for a long time and hope for prices to go up, short sellers bet on making money from falling stock prices.

When you short sell, you’re basically selling stocks you don’t own. If the stock prices drop, you can buy them back at the lower price and make a profit.

For example, if you think a stock is overvalued at $100/share, you can short sell it at that price.

If the price later falls to $70/share, you can buy it at the lower price, return the stocks, and make a profit of $30/share.

However, if the prices go up instead, you’ll have to buy the expensive stocks back at a loss.

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