What is short selling?
Short selling — going short — is profiting from a stock falling. You borrow the stock from another investor, sell it at today's price and hope to buy it back cheaper later, so you can return it and keep the difference. If the stock rises instead, you have to buy it back dearer — and because a stock can rise without limit, your possible loss is unlimited. It is the opposite of owning a stock, where you can lose at most what you paid.
You sell something you borrowed and buy it back cheaper. If it rises instead, the loss has no floor.
A worked example
You think a stock at 100 will fall.
- You borrow 10 shares and sell them: +1,000 on the account.
- The stock falls to 80. You buy 10 back: −800.
- You return the 10 shares to the lender. Left over: 200 in profit — minus the borrowing fee and commission.
If it goes wrong: The stock rises to 150. It now costs 1,500 to buy the 10 back. You lost 500 — 50% of what you sold for. If it rises to 300, you lose 2,000 — twice what you ever took in. There is no floor.
Why it differs from owning
| Owning (long) | Shorting | |
|---|---|---|
| You profit when | the price rises | the price falls |
| Largest possible gain | unlimited | 100% (the stock goes to zero) |
| Largest possible loss | what you paid | unlimited |
| Time works | for you (the market usually rises) | against you (borrowing fee, dividends you must pay) |
If you short a stock that pays a dividend, you have to pay the dividend to the person you borrowed from. And the lender can recall the stock whenever it suits them — often just as it is rising most.
What it means for you
As an ordinary investor you rarely short yourself — it requires a special agreement with your broker, and many banks do not offer it to retail clients. But you meet the word in the news: "hedge funds are shorting company X". Large short positions must be disclosed, and they tell you that some professionals are betting on a fall. That is information, not a verdict. And a short squeeze is when the shorters are forced to buy back at the same time, so the price explodes upward — that is what happened with GameStop in 2021.
The typical beginner's mistake
Believing shorting is simply "the reverse of buying" and therefore just as safe. It is not: the gain is capped, the loss is not, and the market rises more often than it falls. Even professionals often lose money on it.
How you see it in Kiggo
Kiggo does not trade and offers no short selling. Kiggo shows the stock's price and trend, so you can understand what a news story about "short sellers" is about. Kiggo's glossary explains the word; it does not recommend it.
Related terms
Frequently asked questions
Can I short as a retail investor?
At some brokers yes, typically via leveraged products (CFDs) rather than actual stock loans. Many banks do not offer it. It requires a fair amount of experience and is not built for beginners.
What is a short squeeze?
When a heavily shorted stock suddenly rises and the shorters are forced to buy back to cap their losses — which makes it rise even more. GameStop in January 2021 is the famous example.
Is shorting bad for the market?
It is debated. Short sellers occasionally expose fraud and overvalued companies, because they profit from being right. On the other hand they can push a stock down. In the EU, "naked shorting" — selling shares you have not borrowed — is banned.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
