Given the bearish sentiment that pervaded the market, there was a notable surge in short sellers in the second quarter. This strategy allows traders to try to benefit from falling asset prices, which occurs against the backdrop of falling markets.
In fact, 38% of all trades executed on the platform between April 1, 2022 and June 30, 2022, according to the latest “Pulse” report from trading and investment platform Capital.com on July 27 Members made short trades in the second quarter of 2022, a 34% increase from the previous quarter. Furthermore, the study found that during the aforementioned period, short trades (32.1%) were slightly more profitable than long trades (28.7%).
According to David Jones, chief market strategist at Capital.com: “The ability to sell short is likely to have an impact on a trader’s overall P&L. If we enter a period of prolonged market weakness, investors are no longer buying the dips blindly. This can be especially true when it comes to getting returns. Using sensible risk controls, such as stopping losses while short selling, can be a prudent addition to a trader’s overall strategy.”
Jones also believes that the increase in the number of short-sellers in the second quarter indicates a shift in investor sentiment as the market becomes more bearish.