Short Selling

There are many ways to go about trading assets. Some might Dollar Cost Average ETFs/stocks, some might look into Money Market Funds in search for a safe haven with rising interest rates, or some might simply look for stocks that dip and just buy the dip and hope for the best.

Certainly, each strategy carries their own risk and no one strategy can ensure one will make money. Short selling is certainly not a all winning strategy either.

Short selling carries risks that may certainly be higher than the rest. In the event if a trader short sells and the stock rises in price, the trader would lose money. In a hypothetical scenario where stocks would rise to 300% of its original price, the trader would have suffered a 200% loss.

As such, it is important for trader to do their research and certainly not just "YOLO" with such strategies.

A quick survey at the recent short sale volume history shows that on the 8th of August, there was a rather high volume of stocks being shorted. And indeed when one looks at the stock prices during that day,

well what do you know! We see that indeed, traders were bearish on the stock on that day and the stock plummeted by 10%. Traders during that day would have made profits following their decision by short selling.

And subsequently, other firms decided to downgrade its stock from Hold to Sell while others dropped their target price as well.

While certainly one didn't require short sale surveying to have come to the conclusion on why the stock price dropped, it has shown that an abnormal short sale volume thats above the average may change the stock prices, albeit this time round there wasn't a squeeze.

Another interesting  thing about the chart is this:

Notice that on the 26th of July, there seemed to be a below average short sale volume. Turning over to the stock prices we see that that was the turning point for the stock to have shot up during that time, showing the bullishness for the stock.

Perhaps the opposite might hold true from this. A below average short sale volume may sometimes indicate a rise in stock prices in the future. But that is certainly left to be explored and studied with other stocks and short sale volumes!

Overall, short sale surveying may assist in helping traders to gauge the sentiment of the stock, and alongside reading articles, traders may be able to benefit from short sale trading.

It is also important at the end of the day for short sellers to ensure that the amounts that they are selling are amounts that they are comfortable to lose!

And that's all from me, all the best in your trading endeavours =D