🧠 What Is Short Selling? (Explained Like You’re 9)
Imagine your friend has a toy that’s super popular right now. It costs $10. You think it’s just hype and that in a few days, it’ll be worth way less — maybe $5.
So here’s what you do:
- You borrow the toy from your friend and sell it right away for $10.
- Later, when the toy’s price drops to $5, you buy it back cheaper.
- Then you give it back to your friend, just like you promised.
You just made a $5 profit — because you sold high first and bought low later. That’s short selling.
🎯 In Trading Terms:
- You borrow shares of a stock you think will go down.
- You sell them right away at today’s high price.
- When the price drops, you buy them back cheaper and return them.
- The difference is your profit.
🚨 But Be Careful:
- If the stock goes up instead of down, you can lose money — even a lot.
- That’s why short sellers need to use stop-losses and wait for strong setups.
🔑 Summary:
“Short selling is when you make money by selling high and buying low — ”