Short selling involves borrowing shares from a broker to sell them at the current market price, with the goal of buying them back later at a lower price to return to the lender, profiting from the difference.

Theoretically, the maximum loss is infinite. Since a stock's price can rise without a limit, a short seller's potential losses are uncapped. Always use strict stop losses.

A short squeeze occurs when a heavily shorted stock rapidly rises in price, forcing short sellers to buy shares to cover their losing positions, which drives the price up even faster.