Borrowing and selling shares you do not own, anticipating the price will fall — then buying the shares back at a lower price to return them, profiting from the decline.
Deeper Explanation
Short selling is the ultimate contrarian position: profiting from falling prices in companies the market still loves. It carries asymmetric risk — a long position can only fall to zero (100% loss), but a short can rise indefinitely (unlimited theoretical loss). Successful short sellers focus on businesses with unsustainable competitive positions, fraudulent accounting, or vastly overvalued valuations that require near-perfect future execution to justify. Soros and Druckenmiller shorted currencies and markets using reflexivity theory: identifying when a self-reinforcing trend (like the UK's defence of the ERM peg in 1992) was fundamentally untenable and positioning for the inevitable break. Short-selling requires psychological resilience that is distinct from long investing — the position gets more painful (and seemingly more wrong) as the price rises before the thesis plays out.
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Go deeper into the Contrarian school — frameworks, case studies, and decision systems.