What Is Short Selling? Betting a Stock Will Fall, Explained
Short selling is how traders bet that a stock will go down. Normally you buy low and sell high. Short selling flips that: you sell high first, then buy low later. It feels backwards until you see the steps.
How it works, step by step
- You borrow shares (from a broker) and sell them immediately at today's price, say ₹100.
- If the price falls to ₹70, you buy the shares back at ₹70 and return them to the lender.
- You pocket the ₹30 difference (minus costs).
You profited from a falling price — the reverse of normal investing.
Why it's risky
When you buy a stock, the most you can lose is 100% (it goes to zero). When you short, the loss is theoretically unlimited — a stock can keep rising with no ceiling, and you'll have to buy it back at ever-higher prices. That asymmetry makes short selling far riskier than buying.
In India
Retail short selling is generally limited to intraday in the cash market (you square off the same day), while longer bearish bets are usually taken via futures and options. It's an advanced technique, not a beginner's tool.