Stock Market Glossary
Short selling
Selling borrowed securities in order to buy them back later at a cheaper price.
In brief: Selling borrowed securities in order to buy them back later at a cheaper price.
Meaning in practice
Short sellers profit from falling prices, but have to return the borrowed shares. The potential for loss is theoretically unlimited because prices can rise at will – risk management is particularly critical here.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
