What is Short Selling?
Betting a stock will fall by selling borrowed shares and buying them back later.
Formal Definition
Short selling involves borrowing shares, selling them at the current price, and later repurchasing them to return to the lender, profiting if the price falls. Losses are theoretically unlimited because a stock can rise indefinitely, and crowded shorts can trigger a short squeeze. Shorts pay borrowing fees and are exposed to forced buy-ins.
In Simple Terms
It is a way to profit when a stock drops: you borrow shares, sell them high, and hope to buy them back cheaper. The danger is that if the stock rises instead, your losses can balloon.
Example
A trader shorts a stock at $100 and buys it back at $70, pocketing $30 per share minus borrowing costs.