In defense of shorting

Shorting has a bad name with some traders. I believe they just have not thought through the whole process of a "trade.

When you buy a stock there is a seller, when you sell there is a buyer. There are 2 sides to every trade. Now when someone says they do not want to bet against the company they need to remember they are not buying their shares from the actually company, they are making a trade with another trader. When the actually company is putting it's shares in the market, something is going on, IPO, raising capital, getting ready for a pump, dumping etc.

When you buy a stock at ¢.50 and you think what a great price because the price has been falling and it just rebounded at that level and is now going up. You are happy because you have a good entry, but WHO sold you those shares? Probably someone that bought at a higher level and is now taking a loss, NOT the company another TRADER. 

When you go onto Ebay and bid in an auction for an item, lets say a Nike soccer ball. You try to get the best price to buy that ball, the seller knows what price they want to sell the ball for and is waiting for the price to get to that point. Now, you might move your bid higher and the seller might lower their acceptable price based on the interest in the Nike ball. An agreement will be reached and the ball will "trade" hands. 

Does Nike get any of that money? Is Nike concerned that you paid to much for the ball or that maybe the seller lost money on the deal? NO and NO

The company that is getting traded is not involved in the process of the trade, they just know that a trade happened, who made money or lost money is not something they keep up with. You are not trading with the company, you are trading with other PEOPLE and TRADERS like you. You are either the person that is making them money or causing them to lose money. It is a balance, that is what keeps the market going. Shorting has been outlawed before... the overall market dropped.




Pumps and dumps are different animals and there is drastic price manipulation going on there, that is another post all together, just defending the shorts right now. :-)