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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Betting a stock will go down. Risky strategy for advanced traders.
Why It Matters
Short selling lets you profit when stocks fall - but it's dangerous. You borrow shares, sell them, then hope to buy them back cheaper. Here's the terrifying part: a stock can only fall to zero (100% gain), but can rise infinitely (unlimited loss). The GameStop short squeeze in 2021 bankrupted some short sellers who lost billions.
Key Points
- You borrow shares from your broker, sell them, then must buy them back later to return
- If the stock rises instead of falls, you lose money - potentially more than you invested
- Short interest (percentage of shares sold short) shows how many people are betting against a stock
Related Terms
Common Questions
Betting a stock will go down. Risky strategy for advanced traders. Short selling lets you profit when stocks fall - but it's dangerous. You borrow shares, sell them, then hope to buy them back cheaper.
Short selling lets you profit when stocks fall - but it's dangerous. You borrow shares, sell them, then hope to buy them back cheaper. Here's the terrifying part: a stock can only fall to zero (100% gain), but can rise infinitely (unlimited loss). The GameStop short squeeze in 2021 bankrupted some short sellers who lost billions.
You borrow shares from your broker, sell them, then must buy them back later to return
If the stock rises instead of falls, you lose money - potentially more than you invested
Short interest (percentage of shares sold short) shows how many people are betting against a stock