From as far back as the Neolithic period (9500-8500 BCE), profitable investing has revolved around assets increasing in value. But what isn’t commonly known is you can make money when assets lose value as well.

“Short selling” is a style of investing where traders profit off a stock’s losses rather than its gains. Jacob Little, known as “the great bear of Wall Street”, pioneered short selling in US stock markets in 1822, which paved the way for trading floors around the world to continue finding new opportunities to make money during a down market.

Most stock investors look for companies with strong growth prospects and buy their stocks (ie take a “long position”) in the hope of benefiting when the prices go up over the long term.

Short selling is a popular strategy for traders around the world.Credit: AP

Short sellers work the other way, and target stocks they believe are headed for a sharp decline in the near-term. Rather than buy the stocks, short sellers “borrow” them on the open market, wait for the price to drop, then buy the stocks back cheaper to........

© The Sydney Morning Herald