Summary: Selling Short:
Selling short is a strategy employed by traders to make a profit when the price of something is expected to drop. Usually, the asset involved is a commodity, a stock, or national currency.

The gamble works as follows: first, the trader borrows a fixed quantity of the asset and agrees to return the same quantity at some future date. The trader immediately sells what he borrowed and pockets the payment.

To meet his loan obligation, however, he will have to buy back the asset he just sold.

He stands to make money if he can buy the asset back for less than he just sold it for. So he waits to re-purchase until the price of the asset has dropped.

But if instead the price rises, and his loan comes due while the price of the asset is still high, then the trader will have to pay more to repurchase than he made in the original sale. In other words, if the price of the asset doesn't drop as expected, a trader will lose money in a short sale.