I'd also like to think that I'm not a dimwit, but after a friend explained it to me I still had to look it up to understand it. This is a good, pithy summary:
Short selling is a trading strategy where an investor bets that a stock’s price will go down.
Here’s how it works, step-by-step:
1. Borrow the shares
The trader/investor borrows shares from a broker (they don’t own them).
2. Sell the borrowed shares
They immediately sell those borrowed shares at the current market price.
3. Wait for the price to fall
If the price drops, the trader buys the same number of shares back at the new, lower price.
4. Return the shares to the broker
The trader gives the borrowed shares back and keeps the difference as profit.
Example
You short 10 shares of a stock at $100 each → you receive $1,000.
Later, the price falls to $70 → you buy back the 10 shares for $700.
You return the shares to the broker and keep the $300 difference (minus fees/interest).
Obviously, if the value of the shares doesn't fall, you're in trouble, as you still have to ultimately return them to the original owner/broker, but you won't have made any profit.
And if the value of the shares actually goes up, you're screwed, because you're actively losing money, as you owe the original owner/broker the current higher price, not the lower price you bought them at. Fun times.