Short Selling

MoneyBestPal Team
A trading strategy used by investors who anticipate that the price of a security will decline in the future.

Investors who believe that a security's price will fall in the future use the short-selling trading method. By borrowing a security from a broker and selling it on the market, an investor engages in short selling with the intention of later purchasing the security at a reduced price and returning it to the broker.

When an investor wishes to protect himself against probable losses in a long position or when the market is bearish, short selling is frequently done. An investor can profit from a falling market by shorting security. Yet, short selling is also seen as a high-risk technique because there is a limitless possibility of losses if the security's price rises rather than falls.

Although it is frequently employed in the stock market, short selling is also acceptable in other financial markets like those for trading options and futures. Although short selling is generally lawful, regulatory organizations may set restrictions or rules to prevent market manipulation or excessive speculation.