If shorting, profit is maximised the closer you sell to the bottom. Therefore, you would not borrow your shares then dump them on the martket all in one go because you need the price to decline before you start selling. Depending on your short position, there are significant costs involved with taking it. I don't know what they are off the top of my head but imagine they are at least 5%. If so, then you would need the SP to decline by 5% just to break even. But where would this decline initially come from? It can't come from you unless you took out a huge short position and fully engineered a short term collapse.
But how many large investors give their traders that kind of freedom of movement?
In reality, large short positions are taken when you believe that there is a serious flaw in the company, and that in the near term, that flaw will be revealed to the market. When the flaw is revealed the market will dump the stock anyway, which will create the decline for the shorters to take advantage of.
As I said, if anything large short positions actually slow down a decline because shorters will start buying at various points to cover the position. If you didn't allow shorting then a stock could literally drop 99% in a day because there's no real reason to buy. Shorters have a real reason to buy because that is when they close out their position and profit. Imagine if fear took over a company and there were no reasons for anyone to buy it on the way down. Shorters don't know when the company will fully bottom so they close their positions at vairous points along the way. This, then creates buying signals and traders jump on that signal and create various rallies. These falls and rallies form technical support levels that simply wouldn't exist without shorters buying for cover.
RFG Price at posting:
$1.20 Sentiment: Sell Disclosure: Not Held
