Many investors fail to understand the concept of short selling. In general, people invest in buying an asset, hold it until the time it appreciates in value and then sell it off, thereby making a profit. Short selling operates in exact contrast. Here, the investor buys shares that are going to decrease in value in the near future. An investor makes money when the value of security falls. The concept of short selling is an advanced trading technique suitable only for investors who have the heart to take risk More..

Short selling can be defined as a trade practice where a security, commodity or a contract is sold by an investor who is not the owner of the stock. The prime objective of a short sale is to capitalize on a security whose value might decrease in near future. Here, the broker lends the seller some shares that can be sold at a higher price. Once the price of these securities decline, the seller can buy back the shares at a lower price and replace them to the broker. The difference in the sale and purchase price is pocketed by the seller More..