What is "Short Selling"?

05/23/2022 03:42 PM By Matt Ratliff

Buy Low - Sell High - we have all heard that and probably repeat it often.  But the truth is, well it is hard to achieve.  Many investors react to falling prices by selling, attempting to preserve what capital they have invested.  Often that trade comes late and now you have done the opposite, "Buy High - Sell Low".

So how do we "Buy Low and Sell High" in that kind of scenario.  One technique is "short selling".    Selling short means you sell the asset before you own it, believing the price will fall.   Take a minute to watch this video to learn more about short selling. 

Can I really make money trading a down market?
Seems strange, especially to the "buy and hold" crowd, but yes you can make money trading in a down market.  One popular technique is "short selling".
Why is it called "Short Selling"?

I don't really know for sure.  Some believe it came from commodities traders..  But both terms "short" and "long" have real definitions..

How popular is it?

Short selling can be very popular, espeically when the market is volatile  making sizable moves up and down daily.  

Should I be doing it

Well, short selling can be quite risky, so if you are not highly skilled, then maybe not.  But once you know what you are doing, then carefully consider it.  

Matt Ratliff