A trading that involves selling securities an investor doesn’t own. The broker borrows the securities from another client and sells them in the market. The investor, at some stage, must buy the securities back at their market price to replenish the account of the client.

This investment tactic is designed to take avail of a bearish market for the security in question, whereby the short seller makes his profits from the difference between the price of the security he borrowed and sold in a bull market and the “less” price he must pay to buy the same security in a bear market and hands it over to the broker so his investment position is closed. If market prices didn’t go down as expected, the short seller suffers losses represented by the difference in price.

Shorting is also known as short selling.