Short selling
Also called: shorting, short
Short selling is borrowing shares, selling them, and buying them back later, to profit if the price falls.
If the price drops, you buy back cheaper and keep the difference. If it rises, your loss has no ceiling, because a price can keep rising.
Shorts need a margin account with collateral, and a short squeeze happens when rising prices force many short sellers to buy back at once.
Formula
Profit = (sale price − buy-back price) × shares − borrowing costs
In Journey Shares
Short any person through the bank once your account is big enough, with 150% collateral like real brokers require. →
Related terms
- Margin: Buying on margin means borrowing money from your broker to buy more stock than your cash alone allows, using your investments as collateral.
- Short squeeze: A short squeeze is a sharp price rise that forces short sellers to buy shares back to limit their losses, which pushes the price even higher.
- Bear market: A bear market is a long period of falling prices, usually a drop of 20% or more from a recent high.
- Collateral: Collateral is an asset a borrower pledges to a lender, which the lender can take or sell if the loan isn't repaid.
Guides
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.