What is short selling, and how can investors profit from it?

Short selling in the stock market involves an investor selling shares they do not own, speculating that the stock price will decline in the future. The process starts with the investor borrowing shares and selling them at the current market price. If the stock price falls, the investor can repurchase the shares at a lower price, return them to the lender, and pocket the difference as profit. However, this strategy carries high risks; if the stock price rises instead, the investor must buy back the shares at a higher price, potentially leading to unlimited losses since there is no cap on how high the price can go. Therefore, while short selling can be lucrative in a declining market, it requires careful consideration and risk management.

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