Short selling is as old as the business of securities trading. As early as the 17th century the Dutch had made short selling illegal. In subsequent years, shorting was made a crime by various monarchs, governments and eventually exchanges. Even New York State legislated against shorting in the early 1800's, only to retract the law forty years later.

Short selling is largely ignored by the 70 million or so investors reported to be directly involved in U.S. stock markets. Those who do understand frequently criticize shorting as overly speculative or pessimistic. What the critics fail to understand is how important a role shorting plays by providing liquidity and giving the investor greater flexibility in managing their portfolio.

The Motley Fool gives a great introduction to short selling. Check back with me - I'll post more info on the basics of short selling in the next few weeks.

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