Short-term capital gains refer to the profits made from selling assets, such as stocks or real estate, that have been held for one year or less. These gains are typically taxed at the individual's ordinary income tax rate, which can be higher than the tax rate for long-term capital gains. Investors often engage in short-term trading to capitalize on market fluctuations. However, frequent buying and selling can lead to higher tax liabilities, making it essential for investors to understand the implications of their trading strategies on their overall tax situation.