The mechanics
A short seller borrows shares, sells them, and aims to buy them back lower. The broker must locate the borrow, and it can carry a fee that changes daily.
Asymmetric risk
A long position can only go to zero. A short position has no upper bound, so a squeeze can produce losses larger than the original position value.
What disciplined shorts do differently
They size smaller, define the invalidation level before entry, watch short interest and borrow availability, and avoid holding through halts or unknown catalysts.
- Hard stop defined before entry
- Smaller size than an equivalent long
- Awareness of short interest and borrow cost
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