Short sales and acceleration

Short sales and acceleration

Under normal circumstances, short selling has a net functional role in inducing healthy market corrections and balancing prices.

However, when the market enters a full-blown correction, the downside of the correction is always maximized by the profit-maximizing strategies of the short sellers.

This artificial correction of the market, or the situation where the market is pushed to an extreme, is the most counterproductive aspect of the short selling system.

Conversely, at the end of the correction, when the market starts to rebound sharply, signaling the end of the correction, the short squeeze on these shorts starts to occur and accelerate in the opposite direction.

Thus, shorts always serve to accelerate the direction of the market when the market is correcting or bouncing back from a correction.

It is important to understand the nature of these artificial and sharp market movements so that you can trade with confidence.