Short sale

Short sale means to sell and then buy.

In this type of sale, you sell shares of a stock that you do not own, when the price is high, with the expectation to buy them back later when the price is lower. Here you will profit from declining stocks.

Figure 2.3: Short sell

Basically, the broker will lend you the shares and you will return them later. They will charge you an interest depending how long you keep the stocks. This type of sale is only available if your broker has shares of the given stock available for shorting.