Short selling is borrowing the stock of a company and then selling it. If it goes up in price, you will lose money as you will have to replace the stock at a higher price. If it goes down, you will make money as you can now replace the borrowed stock at a lower price and keep the difference.
For example:
GE is trading at $23/shr... you borrow someone else’s shares and sell it. You get $23/shr.
If it goes down to $10/shr, you can buy GE on the open market to replace the shares you originally borrowed. The $13/shr difference in your selling and buying price is your profit.
In essence, it’s the inverse of the “buy low, sell high” strategy. In this strategy, you are buying high and selling low. You make money the same way but in the opposite direction.
Ok, thanks, I had a few concepts wrong. Sorry everybody.