WHAT IS SHORT SELLING

When an investor goes long on an investment, it means the stock has been bought believing its price will rise in the future. Conversely, when an investor goes short, he is anticipating a decline in share price.
Short selling is the selling of a stock that the seller doesn't own. More specifically, short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.
When you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm.
The shares are sold and the proceeds are credited to your account. Sooner or later, you must 'close' the short by buying back the same number of shares and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money.Since you don't own the stock, you must pay the lender of the stock any dividends or rights declared during the course of the loan. If the stock splits during the course of your short, you'll owe twice the number of shares at half the price.
Also, because you are being loaned the stock, you are buying on margin. In fact, you have to open a margin account to short stocks. There are two main motivations to short a stock. The most obvious reason to short is to profit from an overpriced stock or market. Sophisticated money managers short as an active investing strategy to hedge positions. This means they are protecting other long positions with offsetting short positions.