What Is Shorting?

Short selling, also known as shorting or going short, is a trading strategy in which an investor borrows as aasset, sells the borrowed asset, and then aims to buy the asset back at a lower price to make a profit.

The goal of short selling is to profit from a decline in the price of the security being shorted. In a short sale, the investor borrows shares from another investor, typically through a brokerage, and sells the borrowed shares on the open market. If the price of the security drops, the investor can buy the shares back at a lower price and return the borrowed shares to the lender, pocketing the difference as profit. However, if the price of the security increases, the short seller incurs a loss, which can be unlimited.

Short selling is a high-risk strategy that requires a solid understanding of market dynamics and a careful risk management plan.

In decentralised finance, you can build a short trade using lending protocols.

See also