I think thats a poor description because you fail to indicate that short selling is simple manipulation of a broker accounting function. That is the foundation of short selling. The other stuff is all about motivation and sentiment which is really immaterial to understanding the mechanics of short selling.
Ordinary buy = buy stock and (hopefully) sell it later for a higher price = profit
Short sale = sell a stock and (hopefully) buy it back at a lower price = profit
Accounting goes like this
ordinary
Account
Buy 1m @ $10 DR ($10,000)
Sell 1m @ $13 CR $13,000
Profit Bal $3,000
Short sale
Sell 500 @ $10 CR $5,000
Buy 500 @ $7 DR $(3,500)
Profit Bal $1,500
Note in short selling your broker needs to deliver the shares they have sold to the buying broker.
Since you dont have the shares you sold - the broker will 'borrow/rent' the shares to complete the delivery and balance it's books with the other broker. When you finally buy-in your short - the broker will unwind the renting deal by delivering what you just bought.
On How Short-Selling Works
I think thats a poor description because you fail to indicate that short selling is simple manipulation of a broker accounting function. That is the foundation of short selling. The other stuff is all about motivation and sentiment which is really immaterial to understanding the mechanics of short selling.
Ordinary buy = buy stock and (hopefully) sell it later for a higher price = profit
Short sale = sell a stock and (hopefully) buy it back at a lower price = profit
Accounting goes like this
ordinary
Account
Buy 1m @ $10 DR ($10,000)
Sell 1m @ $13 CR $13,000
Profit Bal $3,000
Short sale
Sell 500 @ $10 CR $5,000
Buy 500 @ $7 DR $(3,500)
Profit Bal $1,500
Note in short selling your broker needs to deliver the shares they have sold to the buying broker.
Since you dont have the shares you sold - the broker will 'borrow/rent' the shares to complete the delivery and balance it's books with the other broker. When you finally buy-in your short - the broker will unwind the renting deal by delivering what you just bought.