What is the difference between Selling and Selling Short in stock market (In simple words)?

Question

What is the difference between Selling and Selling Short in stock market (In simple words)?

Answer 1

selling = I sold a stock that I owned.

selling short = I don't own the stock. I am selling it now ("opening a short position"), with the idea of buying it back at a lower price  ("closing a short position"). I make money when the stock prices falls. I lose if the stock goes up.

Answer 2

When selling, you are selling something you own at the time you sell it.

When selling short, you are selling something you do not own at the time you sell it.

Answer 3

There is a missing piece in the other explanations.

If you sell a stock -- you are selling something that you already own (everyone got that).

When you sell short, you sell something that you don't own -- and buy it back later (everyone got that, too).  But here is more information about selling short:

1.  You borrow someone else's shares (your broker does this for you).

2.  You sell the shares that you borrowed.  You are only allowed to sell short if the last price change was higher than the old price.  This is to prevent people from manipulating the market.

3.  The money that you get is kept in your brokerage account.  This is to keep you from selling a lot of shares short & then running off with the money.  You do get interest on the cash -- and you can invest it in other securities.  If the stock you are shorting goes way up in price, you may get a margin call -- so the brokerage knows that you can cover your short position if you need to.

4.  If the stock tha tyou sell short pays dividends, you have to pay the dividend value to the person you borrowed the shares from.

5.  To cover your short position, you eventually have to buy shares.  At that point, you return the new shares to the person you borrowed them from (the brokerage does this for you).  You can keep any money you made if you bought them back at a lower price.

Answer 4

Short selling example so you can conceptualize it.  

This example assumes you buy and sell one share of stock and there are no fee's and or commissions on the trade.

The price of a stock is say 40 dollars a share and you feel that the price is going to go down.  To enter into a short sale you borrow the stock and sell it at the current market price and collect 40 dollars.  The price of the underlying stock goes to 30 dollars.  You would then buy the stock at 30 and give it back to the owner.

Since you collected 40 on the sale and it only cost you 30 to buy back to stock to give to the owner you would get to keep 10 for yourself.

Selling on the other hand you own the asset and when you sell it that is what you get.

Answer 5

Selling is selling something you own.

Selling short is selling something you do not own, in the hope that you will be able to buy it back at a lower price before you have to make delivery.