Yes. If you buy shares and the price increases, you can sell these shares for a profit before the market is settled. For example:
- You buy shares at a price of $6.00. The next day the market price has increased to $7.50. You can sell these shares and take a profit of $1.50 per share.
But if you sell your shares for a lower price you'll make a loss. For example:
- You buy shares at a price of $6.00. The next day the price has dropped to $4.90. If you sell these shares you will suffer a loss of $1.10 per share.
Why would you sell for a loss? You may want to sell your shares if you think the market will drop further, to help minimize losses.
Because you also have the option of short selling shares you can sell the shares first and then buy them back later at a lower price to make a profit. You have still bought low and sold high, only you did the selling part of the process first. For example:
- You short sell shares at a price of $8.00. The price of the shares slips to $5.30 later in the day. You can now buy back these shares for a profit of $2.70 per share (you make this profit because you bought at $5.30 and sold for $8.00).
But if you buy back your shares for a higher price then you make a loss. For example:
- You short sell shares at a price of $8.00. The price of the shares increases to $9.25 later in the day. If you buy back these shares you will suffer a loss of $1.25 per share (i.e. you bought at $9.25 and sold for $8.00).
You may want to do this in order to minimize your losses if you think the price of the market will continue to rise.