I just cannot, for the life of me, understand how you make a profit by it.
In: Economics
To grossly oversimplify, sell stock you dont have and promise to buy it back later. It’s like taking a loan but the amount you need to pay back varies depending on the stock price. If the price goes down, you can pay off your loan for cheap and keep the rest of the initial profits, if the price goes up, you are forced to pay extra and you lose money (and since there’s no limit to how expensive a stock could get, short selling is SUPER dangerous). So while normal stock trades operate on “buy low, sell high” logic, short selling does the opposite “open high, close low”
Naturally, there are a ton of mechanisms in place on most trading sites to prevent people from abusing this. Most commonly, you will be charged interest until you buy back the stock and close the short sale.
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