What is Short Sell

When an investor goes long on an investment, it means he has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he is selling a stock (ofcourse he's not holding the same) anticipating a decrease in share price.Its just like you are short of money in a casino but are sure that you would win the next game and you lend some money from your friend to play and return the same after the game (you have to).The only difference is that in stocks you have to return the stock back that has been sold without holding it and thats too before the market close (there are some cases in which you can't buy back, any guessess.)However in derivatives trading you have the time buy back until its expiry...Confused? Ok simple when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. You must "close" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money"

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