What is Short Selling?

Short Selling: Short selling means an incomplete sell. For short selling, the trader needs to sell a share first for a short time and then buy it again.

Generally, we all know that buying and selling stock in the stock market makes a profit. That is to earn a profit in the stock market, buy the stock at a low price and sell it at higher prices.

But the short selling is completely opposite to the concept of the stock market. In short selling concept, even if the trader doesn't have the stock then also he can send the order of selling it first and make a profit.rnTo make a profit in the stock market, it is not necessary that stock price should increase then only you can make a profit, but a good profit can be earned on falling stock prices too.rnTo make a profit on falling stock price, You have to sell the stock at a higher price, even if you have that stock or not, and later when the stock price falls, then it has to buy back at a lower price.rnIn this way, when you sell a stock first and buy later, it is called Short Selling.

Profit on Short Selling

The advantage in the case of Short Sell occurs when we sell the stock at a higher price, as soon as the stock price falls, buy it at a lower price.

Profit in Short Selling = Sell High - Buy LowrnLoss On Short Selling

When you sell the stock at a high price, and you have to buy back stock at the higher price above the sale price, then in such case you have a loss. Therefore,

Short Selling = Sell Price - Buy price (Higher than sell)

Note that this is a short selling an incomplete transaction, and completes only when you buy that stock again. And in this way, you have to compulsorily complete your deal in a set time, and due to this compulsion, you have to buy a lot even if the stock price is high so that your deal is completed, but when you do this you also lose.