How is short interest used in trading?

Asked 4 years ago

Hi. What does short interest mean, and what does it tell us about the stock and our trading methods? Is it good or bad? Thanks.

Short interest

Andia Rispah Igobwa

Monday, August 16, 2021

Short interest is simply how many shares of stock have been sold short. 
What does it say about the stock? It tells investors how many shares are being traded, on average, by the shorts. To profit on these securities, investors need enough "sell" orders to buy from before they run out and return them. 
So a high number means there's more supply of those securities in general, or people are trying to offload their shares at will, in which case you could see a larger drop once inventory starts running out, so keep an eye on this metric if you want to know when that time might be near.