What is short selling?
Short selling is betting a price will fall — you sell borrowed shares hoping to buy them back cheaper. Profits are capped; losses can be unlimited.
Short selling is a way to profit when you expect a stock to fall. You sell shares you don’t own (borrowed, or via derivatives), and if the price drops you buy them back cheaper, pocketing the difference. It’s the mirror image of normal "buy low, sell high" — here you sell high first, then buy low.
The risk profile is dangerously asymmetric. If you buy a stock, the most you can lose is 100% (it goes to zero), but a short can lose far more — because a stock can rise indefinitely, your potential loss is theoretically unlimited. A sharp rally can also force shorts to buy back in a panic (a "short squeeze"), pushing the price even higher.
In India, retail short selling within the cash market is mostly limited to intraday (squared off same day), while sustained shorts are usually done through futures and options. It’s an advanced, high-risk strategy — useful for hedging by professionals, but rarely where beginners should start.
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Common questions
Why is short selling so risky?
Because losses are theoretically unlimited — a stock you’re short can keep rising with no ceiling, while your maximum gain is capped (the price can only fall to zero). A short squeeze can amplify losses fast.
Can I short a stock for the long term in India?
In the cash market, retail short selling is generally intraday only. Holding a sustained bearish position usually requires futures or options, which carry their own leverage and time-decay risks.