# Short Selling

First things first. Short selling is just _opposite_ of buying a position at cheap and selling it at a profit. People does it every day, minute and second. There is nothing unpatriotic about it. It is balance of power. Think about it this was during the depth of the Covid low in March, or during the depth of the financial crisis on 2009, at the very bottom, when you thought the financial world is coming to and end, do you know who was buying? Short-sellers.

![image.png](https://images.hive.blog/DQmPsgcG2XXbDoxoGRpf5WY1N23pfwnQW2fSS7gQH2mmPNH/image.png) 

> Short selling is a fairly simple concept—an investor borrows a stock, sells the stock, and then buys the stock back to return it to the lender.

For individual stocks, the word borrowing do still have some meaning. But for a index futures or a currency position it hardly does. It is just another trade in the opposite direction. You short something if you think its too high and it will drop in price. So you sell the instrument. If you are correct and when it is dropped, you 'cover' or buy it back at a lower price than original. That's all there is to it.

Covering you short is essentially buying a stock or future or crypto from the open market. It is often highly needed when a particular instument is falling into a bottomless pit. Just like the chart above of S&P 500, which is the US stock market index in March of 2020 during the first wave of covid crisis. That first rally out of the bottom is usually always a short-cover rally. This is becuase at some point in time, the short sellers will think enough is enough, now the market has dropped enough and it is time to lock in profit. They cover their shorts by buying the market, and that is usually triggers the rally at every market bottom.

# Scale

I have said this a number of times that I am a day trade. So my activities are limited to a day mostly. But that said, I do have some investment position where I do hold things over days, weeks, months and even years. So I do look at the daily and weekly charts. Looking at this daily chart I think I can assume that lots of short sellers are entering position. The recent rally of the market is on low volume. The previous volatility is dropping. All this might show that time is ripe for a short downward movement which is just a currection. This could be very healthy for the market

# Seasonality

Jan-Feb-Mar are usually not very good for the market. Especially after a long run. US election is over. Most of the optimism is already priced-in. Market has been rallying for months with a completely stalled global economy mostly running on stimulus. Since market is forward looking, I think lots of that could already be priced in. It would be nice to have a correction at the market. 

Now this is my wish or expectation. Market obviously doesn't care about it, and can rally right through my wishes. All I am saying a bit of a correction in the early half of the year wouldn't hurt.



_Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have._

_Charts are created in Tradingview.com, which is a free service._

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