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How does short selling work?

How does short selling work?

Short selling a currency, occurs when you believe a currency is overvalued. To gain in that position you short sell the currency hoping to buy it back when the price normalizes. Short sellers are called bulls in the forex trading market. Let’s say you are holding US$1,000 and it is currently priced at USD/ZAR 14.9877. You have a bullish sentiment and believe the dollar is overpriced, you sell the USD/ZAR at current market rates to obtain R14,987. A week later the market forces bring the price back to equilibrium of USD/ZAR 13.89244. You buy the $1,000 at 13.892444 making a profit of R1,905

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