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Short selling involves selling a security that a seller does not own,
or any sale that is completed by the delivery of a security borrowed
by the seller. One profits from short selling by buying the stock at a
lower price than the price at which they sold short.
2. Going against the general market trend:
Over the long run, most stocks appreciate in value. Even if the
company has limited growth potential, inflation tends to drive the
price of the stock. Thus, short selling requires a professional
approach and thus turns risky for small investors.
3. A risky bet:
Timing of the trade is crucial in short selling. If one sells the
stock after the downward momentum is about to end it can result in
infinite loss to the traders as there is no upside limit.
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