Short
A position that profits when the price falls.
Also called: go short · short selling · sell side
In plain language
Shorting means selling an asset you do not own — typically borrowed from your broker — with the intention of buying it back cheaper.
On a short trade the geometry flips. Risk sits above your entry, reward sits below it, and your stop loss belongs above the entry price.
The risk profile is asymmetric in an uncomfortable way. Your maximum profit is capped, because price can only fall to zero, while your maximum loss is theoretically unlimited as price rises.
Seen on a chart
Why it matters
Because losses on a short grow as the position moves against you, disciplined stops and correct position sizing matter more here than anywhere else.
Common mistakes
- Placing the stop below the entry on a short, which inverts the risk math.
- Ignoring borrow fees and the risk of a forced buy-in on hard-to-borrow stocks.
- Shorting into a crowded position without accounting for short squeeze risk.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
A position that profits when the price rises.
The number of shares sold short but not yet bought back, often shown as a percent of float.
A predefined exit that closes a losing trade before the loss becomes serious.
The amount of an asset you buy or sell in a single trade.
The capital your broker requires you to post to open and hold a leveraged position.