bots explained, page-8

buddy,

think about it this way:

some of us (investors in the share market) are interested in medium term/long term investement. we plant a small seed & hope for it to grow to become a big tree in few years time.

others, for example who are on the borders of retirement or those who self manage their own super fund or general fund managers, need to exercise an INVESTMENT MANAGEMENT strategies.

Investement management strategies is all about dealing with any move of the stocks (whether up or down) in a positive way in the short term.

so, if you are investing say $1m & market starts to fall then you shouldn't sit back (from an investment management point of view) & watch your stocks fall but rather act immediatly because you don't want to be stuck on a lower money than what you have in your fund ON THE SHORT TERM.

So those people who sell when markets are falling are NOT devils & NOT bad people by any chance.

these people just sell because they can't afford to wait for markets to go up again EVEN if they beleive in the potential of a particular stock.

fund managers act in the same way becuase they don't want their members to see their super fund decrease when markets fall (even that it happens anyways) but they try to minimise the loss by selling on the smallest sign of decline & buy back again on lower to LOWER THEIR CAPITAL EXPOSURE at the time of decline & they are READY to buy the same stocks at higher price & this is the risk they hold!!

My point here is: all stocks go up & down & when they go up then longs buy more than selling shorts & when they decline then shorts sell more than buying longs.

the 2007 stats I think were that between longs & shorts there is a 60% longs & 40% shorts (that was back in 2007 from memory) I'm not sure what is the current ratio is but it varies between each market cycle & the next & also according to the overall market sentiments.

so shorting is a part of investment & is not a bad thing but rather a bet based on a REALISTIC forcast of the future with short term benefit in mind.

you & me could afford to wait few months if our favorite stocks decline becuase we believe in thier long term potential while others decide to ACT IMMEDIATLY on the fact that the stock is going to fall & decide not to wait & sell immediately.

without shorts, there will be no market....simply becuase no one will be selling!!!! we all will be holding stocks forever & we won't find anyone to sell to us any shares & no new investors will be coming to the market!!

cheers,