For example, when you expect a stock to fall in the future, sell the stock you own when the current price is high, and then buy it when the stock price falls to a certain level, so the difference is your profit. Short selling refers to selling stocks at the current price in the expectation of future market decline, and buying them after the market decline to make a profit. It is characterized by the trading behavior of selling first and then buying. This is the opposite of doing more. Theoretically, it is to borrow goods to sell first and then buy them back. Generally, the regular short-selling market has a neutral warehouse to provide a platform for borrowing goods. In fact, it is a bit like the credit transaction model in business. This model can profit in the wave band of falling prices, that is, borrowing goods at a high level and selling them, and then buying and returning them after falling. So buying is still low, selling is still high, but the operating procedures are reversed.
Short-term impact:
Short-selling mechanism, of course, also has great risks for bookmakers. However, the temptation of profiteering is enormous. Under the temptation of profiteering and poor supervision, they will do whatever it takes to spread more false information, do business more frequently and manipulate prices together. Especially under the short-selling mechanism, stock indexes and stock prices will plummet frequently, which will make some groups and individuals gain huge profits and there will be real short positions in the market. For small and medium-sized investors who can only rely on the stock price increase, how can they have the ability to fight with short positions and win?
Short selling mechanism has positive significance and function to the stock market, but its negative effect is also obvious. Especially for an emerging market with a short history, imperfect legal system, loopholes in rules and extremely asymmetric information, if its negative impact is not paid enough attention and effectively controlled, its lethality will be enough to destroy the whole market, trigger financial turmoil, undermine the stability of the situation and hinder the healthy development of China stock market. This is by no means alarmist. The history of overseas securities market development has repeatedly shown the huge negative effects of short selling mechanism.
For the majority of small and medium-sized investors, we must be alert and alert to the short-selling mechanism; As far as the regulatory authorities are concerned, we strongly appeal that we must be cautious when launching the short-selling mechanism, especially when introducing relevant laws and regulations, strengthening supervision and effectively protecting the legitimate rights and interests of small and medium-sized investors.