Short selling is a strategy where you borrow shares to sell them immediately, hoping the price drops so you can buy them back cheaper later. Traders use it for speculation or to hedge their portfolios against downside risk. Since you are borrowing shares, you need a margin account and have to pay interest on the position. The main risk is that losses are technically unlimited. When you buy a stock, you can only lose what you invested. When you short, the stock can keep going up indefinitely. If the price spikes, you might face a margin call and be forced to liquidate. This forced buying can trigger a short squeeze, similar to what happened with Volkswagen in 2008 or GameStop in 2021. The SEC implemented new rules in October 2023 requiring investors to report short positions to improve transparency. Key metrics to watch include the short interest ratio and days-to-cover ratio, which help gauge bearish sentiment or the likelihood of a squeeze.