LONG VS. SHORT POSITIONS
Plain English
Going 'long' means you bought shares hoping the price goes up. Going 'short' means you borrowed and sold shares hoping the price goes down — you buy them back later at a lower price and keep the difference. Short selling is risky and complex.
Going deeper
A long position means you own shares and profit when the price rises. A short position means you borrow shares from your broker, sell them, and aim to buy them back at a lower price to return them. Short selling carries unique risks: unlimited loss potential (stock can rise indefinitely), margin requirements, borrowing fees, and the risk of a short squeeze (short sellers forced to buy back shares as the price spikes, pushing it even higher). Short interest (the number of shares sold short) is a useful indicator — very high short interest can signal bearish sentiment but also sets up potential squeezes.
Examples
Successful Short
You believe a company is fraudulent. You borrow 100 shares at $50 and sell them ($5,000 received). The fraud is exposed, stock drops to $5. You buy back 100 shares for $500 and return them. Profit: $4,500.
Short Squeeze
GameStop (GME) had 140% short interest in January 2021. Retail traders started buying aggressively. Short sellers were forced to buy back shares to cover losses, driving the price from $20 to $480 in days — catastrophic losses for shorts.