Can you explain the concept of short selling in intraday trading?

 Friend,

I am an intraday trader and I like to trade in falling markets. So there is no question of not explaining.

Let us understand short selling in the market in simple language.

The literal meaning of short selling is to sell things before buying them and book profit by buying them after the price falls. However, I believe that a new trader is unable to digest the above things. This question comes to his mind spontaneously that how can we sell a stock if we have not bought it?

Let us forget the market for a while…and take some examples from daily life.

Suppose your friend has a watch. The price of which is Rs 2000. You got information that today the price of that watch is going to fall and it will fall to around 1600.

You are a businessman and business is on your mind. You thought that the price of this watch is 2000 right now and if we borrow it from a friend and sell it at the current price, we will get 2000 in our pocket and when the price decreases, we will buy the same watch for 1600 and return it to the friend.

In this case, I will make a total profit of 400 rupees.

Hmm, let's talk to the friend that friend, today I need your watch on loan. There is some work.

The friend agrees with a condition that okay take it but return the watch by this evening.

Now there are three possibilities here.

1) The price of the watch decreased as we thought:

In this case, we will buy it at the reduced price and return it. In which I get a profit at the reduced price.

2) The price remained the same:

In this case, we will have to buy it back for the same price at which we sold it. That is, no profit no loss.

3) The price increased from before:

Now in this case, we are forced to return the watch. Then you will have to buy it at the increased price and return it. That is, with a loss.

If we look closely, we first sold the watch and later bought it to settle the profit loss. This entire process is called short selling.

The role of a friend in the market is played by the broker who provides us the facility to sell the shares first.

Hope the post will be useful for you.

Thank you