I have doubts regarding short selling hoping someone here could answer my question.

Does shorting actually drive down market prices?
I understand shorting means borrowing shares from another investor and selling it. But at the end of the day they have to cover the shorts within a certain fixed time frame which will cause a price influx again. So what i thought was, shorting does not rly drive prices down in a longer term perspective.
Correct me if i am wrong.

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Roland216

Lending out the poor quality shares is like lending the knive to the murderer. The marketing gimmicks is to lend out and earn interest while lending. However the opposite reality of truth, the borrower are often the skilled traders to borrow and SHORT the market.

In a market where no lending allowed. The investor are allow to sell the shares only thus SUPPLY = S1.

In a market where lending is allowed to let ppl short the market, the investor and the SHORTist are allow to sell the Shares thus SUPPLY = S1 + S2. Hence the market get more volatile with S1 + S2.

Similarly, a buyer market without leverage is D1(demand 1). Buyer market with leverage is D2.

A market with leverage is D1 + D2.

Where S1 and S2, meet D1 and D2, its the equilibrium price, but market get more volatile on either Buy side or Sell Side.

To elaborate further, a person whom does not have the Shares, also get to participate in the Downside of the share, contrary to the natural market(without SHORTIST and Leverage).

Therefore the knowledgeable trader get to enjoy both side where the ignorant investor get worst off as his shares get inflence by people whom dont even own the shares. Leverage and lending only benefit the knowledgeable and abuse the newbie. My thesis.

duckie

Reply to @sysy : Since when he buy new condo

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CoryLogics

Exchanges have been implementing ban on such for a period of time in various countries. Obviously shorting will have an impact. They are in this business.

Master_GongJiaowei

retails do not affect the market, only bbs can move it. We are just ridding along with them

EDMW_Capital

According to SGX research, they "recognize that short selling generally plays an important role in markets as it allows for more efficient pricing of securities and facilitates hedging activities."

wellhandy

there's two types of shorts - market maker and direct market access. (dma)

one is "monopoly market" the other is "open market".

if you use market maker, not everyone can see your transaction.
if you want to leave a mark in the markets, you use dma.

not all directly borrows script to short. many use a market maker who owns scripts or have pledged scripts to lend for interest, can lend for quite a while.

shorts take the lift down. so you want to #huat fast and get out.
which is why bear market rallies are also very swift.

most retail lamenting and blaming 'shortists' are actually blaming the wrong people.

shorts help bulls in a bull market. only shorts can let people wedgie.
pants how to wedgie?

so who to attribute for the lifecycle of bull markets?

let's ask sir john templeton.

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luxcan

Reply to @wellhandy : plus Chinese New Year, need to give hong bao, buy children clothes, fork out money for union dinner and lastly gambling.

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paullim

contra buying also drives down prices, since traders have to sell after 5 days

Heracles

Reply to @paullim : which u also have to buy in the first place

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