How does short-selling work?
Logic dictates that first you buy stock and then sell. But in short selling, you actually sell stock before you buy it. Here's how it works:
You borrow the shares from broker (for example, 100 share of ABC), sell them in the market and receive the money from the sale. Then you wait. You hope is that the price of the stock will soon drop, because you will eventually have to replace teh stock you borrowed. If later. on you can buy the stock for less than you originally sold it, you'll profit.
For example, you sell short 100 shares of ABC $90 a share. Two weeks later, you buy the shares of ABC at $60 a share, give them to broker and keep the $30 a share difference as your profit.
Short-selling data and short-Interest of US stocks are provided by NYSE and NASDAQ Stock Exchange. Short-selling is updated on the daily basis. Short-interest is updated semi-monthly.
Short Selling Analysis Chart
(refer below provided by moomoo)
Short Interest
Short Interest shows the companies with the largest amount of short selling in their stock; the largest increases and decreases during the half of month; and something called "largest increase and decreases during the half month". Investors watch shrot interest to judge what other investors are thinking. For example, an increase in short selling of a stock means investors expect the price to fall.
(Refer below provided by moomoo)
Why should you read short-selling data?
The volume of short sale reflects investors' overall judgment on the price trend of a certain stocks and assist investors to understand market sentiment.
For the stocks with a large short sale volume, investors are generally bearish on the stock price outlook. If a stock's short sale volume rises sharply, the stock price is likely to experience a short-term decline.
Changes in short interest and short interest ratio are important indicators of the market's bearish sentiment and possible stock price changes. There are many factors that affect the stock prices, and it is not possible to judge the stock price trend by only relying on a single indicator.
Value investors who seek long term investment could benefit from short-selling data by avoiding the stocks prices which show downward trend; For technical investors who are interested in short sale can find stocks with a high short-selling ratio and thus investment opportunities.
Which trading platform provides short-selling data?
Moomoo trading platform offers short-selling data, investors can judge market sentiment based on short-sale data indicators.
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