Be it any asset class, we believe in buying lower and selling higher.
As the traditional wisdom says, that we need to hold something by paying a price and make a gain by selling it higher.
This comes from traditional assets like land, house, art, gold, etc.
However, as the financial market evolved, they also gave an option of selling something you don’t have, if you think the price is high and the asset is overvalued. And then buying it lower as it corrects thereby making a gain.
There are financial instruments in markets like derivatives and F&O through which an individual can take a short position and then cover it as the prices come lower.
As this happens without holding an asset, there is a time frame attached to it and the settlement is usually in cash. Hence it should be done with precision and with complete knowledge of the action taken.
If done correctly, we can benefit not only from the upsides in the market but from the downsides too.