"Too many retail traders" vs shorts?

Discussion in 'Trading' started by Option Trader, Aug 18, 2008.

  1. A very successful trader on this board once advised me to pull out of a stock in part because "for every share held short, there are almost double as many shares held by retail longs". He was 100% right, and I was 100% wrong.

    What is the significance of such a ratio? Is that really such a danger sign straight across the board?
  2. Nothing. That's like saying you should cover because dogs outnumber cats in this world.
  3. I wish someone would tell that to the fertilizer producers or shorts.

  4. Pooks


    I assume its a way to gauge how optimistic people feel about the stock..

    the theory if everyone is aboard, than it can only signal the top.

    but i dont know if 2:1 longs versus shorts is that significant point, where the tide would turn,

    this is just a simply model, it completely ignores other variables, like how many people actually hold the stock, how many people are on the sidelines.. etc..
  5. That's pretty interesting. It might be worth a look to investigate % of short interest to institutional ownership.