Short selling stocks is one of the strategies used in the financial market when traders predict that the market price will decline. It is used to buy at a low price and then sell at a higher price, but in the opposite way. Where the trader sells shares or securities that he does not actually own. But he borrowed it from a financial intermediary who believed its value would fall in the future. The intermediary lends it with the aim of benefiting from it and making a profit before its value decreases.
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The trader sells the shares he borrowed at the current market price, that is, at the higher price. Then he waits until its price drops, and buys it again after some time, but at a lower price, until he returns it to the broker again.
A trader can make large profits in the short selling process from the difference between the price of selling the stock the first time and its redemption price, but in theory the risk of loss in the method of short selling stocks is unlimited, because the price of any security can rise to... There is no end, and therefore there is no guarantee that the stock price will fall after selling it short. The stages of this method of selling stocks are divided as follows:
The first stage involves having a financial intermediary lend stocks or other financial assets to traders.
The trader sells shares in the financial markets immediately after he borrows them.
The trader waits for a period of time until the stock price decreases and buys it back at a lower price.
The trader returns the shares he purchased to the financial intermediary.