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Liquidity

Short Sellers: Liquidity Providers or Market Disruptors?█ Understanding Short Sellers: Liquidity Providers or Market Disruptors? Short sellers often have a controversial reputation, viewed by many as market manipulators who profit from falling stock prices. However, recent research sheds light on an unexpected and valuable role they play: providing liquidity to the market, especially during critical moments like news releases. Let’s break down this concept in a way that’s approachable for everyone while maintaining the insights of the academic findings. █ What Is Short Selling? In simple terms, short selling is a trading strategy where an investor borrows shares of a stock, sells them, and hopes to buy them back later at a lower price to pocket the difference. While this might sound straightforward, it’s a high-risk activity because the potential losses are unlimited if the stock price rises instead of falling. For long-term investors, the goal is usually to buy strong companies that will grow over time, benefiting from compounding returns and supporting broader economic growth. On the other hand, short selling tends to attract risk-seekers who aim to profit from price declines. Unfortunately, many inexperienced short sellers get burned by the complexities of market dynamics, including the balance of supply and demand for liquidity. █ Why Is Short Selling Important? Despite the risks, short sellers are essential to the financial markets. They help correct overpriced stocks and bring balance to valuations, contributing to more accurate pricing. Moreover, they provide critical insights during times of market euphoria or uncertainty. One example of their importance is the role of short sellers during events like the “short squeezes” in GameStop or Volkswagen. These situations occur when a stock’s price skyrockets, often fueled by retail traders or unexpected news, forcing short sellers to buy back shares at higher prices. While dramatic, such events highlight the complex interaction between short selling and market liquidity. █ A Fresh Perspective: Short Sellers as Liquidity Providers Traditional thinking often casts short sellers as aggressive traders who demand liquidity—placing orders that consume existing bids or offers in the market. However, a recent study challenges this view, showing that some short sellers do the opposite: they provide liquidity. Using transaction-level data, the study reveals that informed short sellers strategically supply liquidity by posting and maintaining limit orders. These orders help stabilize markets, especially during volatile periods like news days. This behavior contrasts with the common perception of short sellers as disruptive forces, instead positioning them as contributors to market efficiency. █ Key Findings from the Research The research, titled Stealthy Shorts: Informed Liquidity Supply, presents several critical insights: ⚪ Liquidity-Supplying vs. Liquidity-Demanding Short Sales: Liquidity-supplying short sellers place limit orders, offering to sell shares at specific prices. Liquidity-demanding short sellers use market orders, which take the best available prices. The study found that liquidity-supplying short sales are more predictive of future stock returns than liquidity-demanding ones. ⚪ Predictive Power of Liquidity-Supplying Shorts: Stocks with high levels of liquidity-supplying short sales underperform those with low levels over a 21-day holding period. This pattern suggests that these short sellers have a long-term informational edge. ⚪ Impact on Price Discovery: By providing liquidity, these short sellers help narrow bid-ask spreads, making it easier for other investors to enter or exit positions at favorable prices. ⚪ Informed Trading: Liquidity-supplying short sellers often act on information not yet fully reflected in stock prices. For example, they are particularly active and accurate around news days when fresh information enters the market. █ Implications for Investors and Regulators The findings challenge regulators and market participants to rethink their views on short sellers. While short selling is often criticized for its potential to destabilize markets, this study highlights a more nuanced role: informed short sellers contribute to market liquidity and efficiency. For everyday investors, this means that short sellers aren’t just betting against companies but also helping ensure that stock prices reflect their true value over time. █ Takeaways for Beginners If you’re new to investing, here’s what you should know: Short selling is risky and generally not recommended for beginners. The potential for unlimited losses makes it a strategy better suited for experienced traders. Short sellers play a vital role in financial markets by helping correct mispricings and improving liquidity. Understanding the mechanics of liquidity supply and demand can provide valuable insights into how markets function. █ Final Thoughts This research highlights the dual role of short sellers, particularly the most informed ones, as both traders and market stabilizers. By offering liquidity and acting on long-lived information, these traders help create more efficient markets, benefiting everyone from retail investors to large institutions. As always, a deeper understanding of market dynamics can empower better investment decisions and help you navigate the complexities of the financial world with confidence. ----------------- Disclaimer This is an educational study for entertainment purposes only. The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs. My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
SP:SPXEducation
by Zeiierman
GOLD 1H ROUTE MAPHere we're analyzing 1H time frame on the basis of SMC and structure mapping concept. So today I'm looking for sell. All you need to do is just wait for price when it comes into our levels, and observe the reaction of price how price react when it enters into our zone. Let's delve deeper into these levels and potential outcomes. Always use stoploss for your trade. Always use proper money management and proper risk to reward ratio. #GOLD 1H Technical Analyze Expected Move.
OANDA:XAUUSDShort
by TradeTacticsreal
GBP/CAD ROUTE MAPThis is my bias for GBP/CAD, where I am expecting the market to sell off from these levels and zones. The market has given a clear MSS, and the SNS has also turned into RNR. Now let's see what happens and which opportunity market will give us. The timeframe we have taken for this analysis is 1 hour. We will take the confirmation and entry on the 30-minute or 15-minute timeframe. Use stoploss for your trade. Always use proper money management and proper R:R ratio. #GBPCAD 1H Technical Analyze Expected Move.
Short
by TradeTacticsreal
BTCUSD ROUTE MAPThe price has reached an all time high (ATH), setting a new record. After hitting this peak, the price then pulled back and found support, where it experienced a strong rejection and is now starting to rise again. This upward movement indicates a potential continuation of the bullish trend. However, I am closely monitoring the resistance level, where I believe there may be an opportunity to sell. As the price approaches this level, I anticipate a potential reversal or consolidation, making it an ideal time to look for a selling opportunity. This analysis is based on Smart Money Concepts (SMC) and price action principles. Time Frame: 1H Always use stoploss for your trade. Always use proper money management and proper risk to reward ratio. #BTCUSD 1H Technical Analyze Expected Move.
OANDA:BTCUSDShort
by TradeTacticsreal
DXY Looking Like It's Setting Up Towards Bearish Liquidity Grab! What's Up Chat, Welcome Forex Traders, Degens, & Investors. Let's jump right in, Dollar looks bullish however we're currently giving it time for it to consolidate, grab as much upside liquidity as possible, before it decides to have a trend reversal. {VISUAL GUIDE:} Eclipses: Have a Letter "M" or "D" Indicating Gaps in either the Monthly time frame or the Daily time frame. Black Lines: Represent Active Monthly liquidity. Blue lines: Represent Active Weekly liquidity. Yellow lines: Represents Active Daily liquidity. White lines: Represents Active 4HR liquidity. Green Landscape Line: Represents Trumps inauguration. Red Landscape Line: Represents 1st Lunar Cycle, FOMC, & Possible Psyop incoming which all has negative sentiment. In continuation, we're looking to sell the dollar, but are being patient to be able to snipe it at the right time. It would be smart to open up a position for a sell around this level, & if you're trading EUR/USD enter a buy position at this level. Small risk as were waiting to DCA, if market gives us a better price point. This is measuring out to be a 400-600 pip move to the downside 5-6% Bearish move or more.
CAPITALCOM:DXYShort
by DegenJake_
GOLD ANALYSISThe price is currently in a consolidation phase. If the price moves above the 2642 area and closes the candle there, it will indicate that buyers have regained their lost control. In this case, we will consider entering a buy trade. On the other hand, if the price breaks below the 2632 area and closes the candle under this level, it will suggest that the sellers have strengthened their position, and we can consider entering a sell trade from this point. In this analysis, the closing of the candle holds significant importance, as it indicates the direction in which the market is likely to move. The way the candle closes helps confirm whether the buyers or sellers are in control, providing critical insight into the potential next move in the market. Time Frame: 30M,15M Always use stoploss for your trade. Always use proper money management and proper risk to reward ratio. #XAUUSD 30M Technical Analysis Expected Move.
FX:XAUUSD
by TradeTacticsreal
Capital Shifts in Crypto: Liquidity, Corrections, and the FutureOn a growing market, each correction serves as a mechanism for capital redistribution. In the cryptocurrency sector, where the market is relatively small, profit-taking on major assets like Bitcoin (BTC) and Ethereum (ETH) has a significantly negative impact on less capitalized altcoins. Analogy with traditional markets Traditional financial markets follow similar principles. Here, Bitcoin can be compared to gold, while altcoins are akin to stocks or bonds. When positions in gold are closed, the fluctuations are less noticeable due to the market's greater liquidity and volume. However, stocks, with their lower capitalization, show significant volatility, leading to an equivalent increase in potential dollar gains. Depth and structure of the crypto market The crypto market still lacks depth, predominantly involving small-scale investment funds by global standards. Competition among expert traders and investors is limited, leading to low profitability or zero gain on bear markets, where professionals trade against each other, for instance, Wintermute traders against GSR traders. In traditional markets, where both professionals and retail investors participate, professionals have an advantage due to more variables. Liquidity and spread Both markets allow for earning on the spread, although currently, spreads are relatively small. The redistribution of liquidity, especially during market downturns, is driven by both psychological factors and the technical aspects of position closing, particularly when comparing futures trading with combined spot and futures trading. Indexation and synthetic assets The creation of indexes in the crypto sphere could be the next step. There are already examples like Reserve Rights (RSR), where real-world assets are tokenized to create stablecoins. Forming indexes similar to the S&P500 or US100 could combine crypto assets by similar characteristics, increasing liquidity and opening new investment avenues. However, this could lead to issues similar to those in 2007 in traditional markets, where "packages" included high-risk assets. Conclusion Implementing such tools might soften the liquidity redistribution effect for retail investors but could complicate things for funds and market makers, reducing their ability to buy assets at reduced prices. The cryptocurrency market is at the stage of mass adoption, and upon completion of this process, new forms of digital money may emerge. Written by Alexander Kostenich (WIDECHAR), Horban Brothers.
CRYPTOCAP:USDT.DLong
by horbanbrothers
| NASDAQ | Weekly outlook for NFP week.This week is active in terms of volatility, with JOLTS today at 10 AM, Unemployment Claims + FOMC tomorrow, and NFP on Friday. The price shows a Market Maker Buy model framework on the daily chart, combined with a weekly distribution framework. I would like to see a run at the liquidity generated by yesterday's economic news driver, although there is SMT divergence with ES! so it might not happen. My ultimate target for the coming weeks is to visit the all-time high (ATH). In the short term, the targets are yesterday's high and the high of the original consolidation of the MMBM framework on the daily chart.
CME_MINI:NQH2025Long
by NarcotikT
Choppy Market: Patience and Key Levels to WatchThis chart highlights a low-probability trading environment with corrective structures and low volatility. Key focus areas: Upside Breakout: Watch for impulsive moves above the 30M trendline and 4H LQZ for short-term bullish setups. Downside Correction: A steeper drop into the 15M or 1H LQZ may provide higher-probability long opportunities. Stay Patient: Avoid trading inside the choppy range; wait for clear reactions at liquidity zones or strong breakouts with momentum.
OANDA:XAUUSDEducation
by Adlercon333
DXY FORECASTIn this forecast we are analyzing 1H time frame for finding the upcoming moves. Today I'm looking for buy opportunity. As we know that market create a clear break of structure and price continue moving upside. If this high is valid than market will need inducement or liquidity, so I'm expecting from market that price first came down and hunt previous SSL and than continue moves in upward direction. Let's delve deeper into these levels and potential outcomes. Use stoploss for your trade. Always use proper money management and proper risk to reward ratio. This is just my prediction. #DXY 1H Technical Analyze Expected Move.
TVC:DXYLong
by TradeTacticsreal
1
GBPCAD MODULEWe are focusing on the 4-hour time frame chart to analyze the potential moves and changes in GBP/CAD price. Based on my bias, I am expecting a sell in the market today. Let's see what kind of opportunity the market provides. It is very important to get confirmation before taking a trade, so always wait for confirmation. Always use stoploss for your trade. Always use proper money management and proper risk to reward ratio. This is just my analysis or prediction. #GBPCAD 4H Technical Analyze Expected Move.
Short
by TradeTacticsreal
Don't go chasing the Gold RushGold has had quite a year, but I’m here to speculate that the run is nearing its end. The focus is on lower targets. Until that level is hit, the framework for trades remains bearish. Whether you’re taking smaller trades within the move or holding for the broader swing, the direction is clear: bearish until proven otherwise. Targets may shift lower as new data comes in, but the current target is set in stone. Invalidation level is the current all-time high at 2800
FOREXCOM:XAUUSDShort
by Obscure_Trading
GOLD FORECASTIn this chart we are analyzing 4H time frame for finding the upcoming moves and changes in gold price. By using SMC concept combine with price action and liquidity concept. I'm looking for buy trade opportunity. So what we will do just wait for price when it comes to our zone and observe the reaction of price when enter into the zone. Let's see what happens and which opportunity market will give us. Let's delve deeper into these levels and potential outcomes. Always use stoploss for your trade. Always use proper money management and proper risk to reward ratio. This is just my analysis or prediction. #XAUUSD 4H Technical Analyze Expected Move.
OANDA:XAUUSDLong
by TradeTacticsreal
BTCUSDT SHORT IDEA. BASED ON LIQUIDITY AND MARKET STRUCTUREWhile the long-term direction of the premier crypto is upwards, with targets at 250k, a slight correction to the previous ATH isn't out of contention. On that note, I'm expecting a drop from around the 100k level towards the previous ATH around 70k-ish. Why 100k? It is both a valid technical and psychological level. Technically, 100k rests at the Internal Range liquidity for the present price leg. Not a financial advise. Do your own research.
by Therealdimkpa
Update: EUR/USD Downward Movement to Continue?In my previous analysis, I highlighted the potential for bearish continuation, targeting the sell-side liquidity (SSL) below. As anticipated, the price respected the retracement into the Daily FVG and Fibonacci zones, sweeping liquidity by taking out the highs. This reaction confirmed bearish intent. On the lower timeframes, a clear entry opportunity emerged, and the pair has since moved lower, heading toward the anticipated SSL target. The bearish structure remains intact, with the next key area of interest around the liquidity pool below. This setup took a week to deliver an entry, but the rewards were definitely worth the wait! This goes to show that patience is essential in trading—there’s absolutely no need to trade every day to succeed. Trade safe!
Short
by jp7fx
2