Short selling refers to a kind of trading where the investor will be selling the stock, which he actually does not own.

In a way to make this sale, the investor will primarily borrow the stock from a broker. The investor will be paying a said fee to the broker for this.

Borrowing the stock is done to make sure that the investor is selling stocks, which are actually there in the market and this can be delivered to the buyer when the buyer is ready to pay for the share and buy it.

After having borrowed the stock from the broker, the seller will be selling it in the market with an ordinary sell order, like he would sell the stocks that he owns.

Short selling is limited or restricted by the “Up Tick” rule.

When the price of a stock goes down, the act of short selling by itself will speed up the decline of value.

This rule avoids an artificial decline in the stock price, which will be caused solely due to short selling. This was especially brought in to force after the Wall Street crash of 1929.