Shorting Stock is Crazy

Shorting stock is when you go to your broker and borrow stocks from your broker's other accounts.  You have their permission and you pay them interest on the borrow, but you are basically betting a stock will plummet and you sell it immediately high, wait for it to crash, and then buy it back at a lower price.  Then you have to return the stock to its original owner, keeping the profit for yourself.

I understand the argument that a short seller is no different than a traditional trader, except they are just trying to make their money inverse of the peaks and troughs.  I still do not feel like this should be legal.  This just opens up the market for deception and manipulation.  I can see issues with insider trading, worse than normal.  I don't think anyone should be rooting for a stock to crash.  That is insane.





Sal Khan does make an interesting argument how short sellers are potentially the only honest people in the market system because everyone else (management, the government, banks, brokers, rating agencies) all have an active incentive to inflate the market.  Fascinating...