Short Selling

Short selling allows traders to profit from declining prices by borrowing shares from a broker, selling them immediately, then buying them back later (hopefully at a lower price) to return to the lender. The difference between sell and buy prices is the profit. Short selling carries unlimited risk since prices can theoretically rise infinitely. It requires a margin account and involves borrowing costs. Short squeezes occur when short sellers are forced to buy back shares, driving prices higher. Regulations like the uptick rule and short sale restrictions can affect short selling. It's used for speculation and hedging.