Short selling plays a critical role in market efficiency by providing liquidity and aiding in price discovery. It allows traders to profit from bearish trends and hedge against downturns in long positions. However, shorting requires careful risk management, as unexpected price increases can lead to margin calls and significant losses. Institutional investors and hedge funds frequently use short selling to balance exposure and enhance portfolio performance. Use stop-loss orders to manage risk when shorting assets. Monitor market sentiment and news events that may impact short positions.
