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Strategies & Market Trends : Take the Money and Run
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To: gypsees who wrote (6343)6/27/2002 2:56:21 PM
From: Jorj X Mckie  Read Replies (1) of 17639
 
The equivalent of shorting in the stock world is going on margin. Some idiots have a problem with "borrowing" stocks because the stocks don't belong to the shorter. Of course, they are awfully damned quiet when it comes to borrowing cash to buy stocks.

Both have similar effects too. Buying on margin can help to create extra demand which can cause stocks to go up even more. Shorting stocks can create extra supply which theoretically cause stocks to go down.

Of course, the delta between the number of people going short and those who are using margin is so large as to render the shorters to be insignificant in their influence in most cases.

The one place where shorters can be a heavy influence in the stock direction is when they cover. A short squeeze can often be the catalyst for a bull run.

The thing about a short position is that at some point, they are going to buy that stock back. That will create demand. Someone who is long on a stock no longer has any influence on the direction....except down. They create the real selling pressure. And when a long sells, there is no guarantee that the position is going to be bought back. Therefore, they provide no positive influence on a stock once they have their position.

The fact is, people who are long a stock want it to go up so that they can *sell* the stock.
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