What does short selling mean?

Short selling (also known as “shorting,” “selling short” or “going short”) refers to the sale of a security or financial instrument that the seller has borrowed to make the short sale. The short seller believes that the borrowed security's price will decline, enabling it to be bought back at a lower price for a profit.

Who is involved in short selling?

Sophisticated investors are also involved in short selling, either to hedge market risk or simply for speculation. Speculators indeed account for a significant share of short activity. Day traders are another key segment of the short side.

Is short selling a safe strategy?

That being said, short selling through exchange-traded funds (ETFs) is a somewhat safer strategy due to the lower risk of a short squeeze. Besides the previously mentioned risk of losing money on a trade from a stock’s price rising, short selling has additional risks that investors should consider.

Are speculators a good option for short selling?

Speculators indeed account for a significant share of short activity. Day traders are another key segment of the short side. Short selling is ideal for very short-term traders who have the wherewithal to keep a close eye on their trading positions, as well as the trading experience to make quick trading decisions.