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Short selling indicator

by Patrick Fonce, 3540 days ago
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Here is another trading indicator that uses the short selling data. The function or indicator determines whether short or long volume is dominating in the last N-period. It uses the short selling ratio to calculate the excess volume (Volume below or above 50%) and then sums up the result over a defined period.
Example:
Bar 1- Short selling ratio is 50% and volume is equal to 1200. Excess ratio is 0% (50 - 50) and excess volume is 0 (0% * 1200).
Bar 2- Short selling ratio is 40% and volume is equal to 1000. Excess ratio is -10% (40 - 50) and excess volume is -100 (-10% * 1000).
Bar 3- Short selling ratio is 55% and volume is equal to 800. Excess ratio is 5% (55 - 50) and excess volume is 40 (5% * 800).
Using a lookback period of three bars, the indicator will return a value of -60 (0 - 100 + 40) in bar number three.

A high value indicates that during a preceding period, short volume was higher than the long volume, while a low value indicates that long transactions are dominating and long volume transactions are higher than short volume transactions. This does not necessary means that a value above zero is bearish and a value below zero is bullish. Extreme readings and divergence between the indicator and the stock prices may be better indicator of the strength and the likelihood of a change in direction of the stock price.


There are several sources and downloaders where to get short selling data. However, it is better to get this data from the downloader that gets and aggregates data of all US exchanges (other downloaders get data from specific exchanges).
This downloader or trading object can be found here (Short Selling Data).
You can use it as follows:
short_ratio = GetData('short_selling', 'ratio', NA);
ind = short_dom(short_ratio, 10);

I use 'NA' in the function that gets short ratio data from the database. This is because if I use 'Zero' or 'LastData', this indicator will interprets the first values of the 'short_ratio' time-series as equal to zero (Which means no short selling data), while they are not (The first values of the 'short_ratio' time-series are equal to zero simply because there is not data).

Another indicator that uses short selling data:
Short Indicator

Short selling data:
NYSE Arca - Daily short sale data
NASDAQ and Boston stock exchanges - Daily short sale data
Short Selling historical data
NSX - Daily short selling data
Short Selling Data


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Additional Information




Type: Trading Indicator

Object ID: 330


Country:
United States

Market: Stock Market

Style:
Fundamental Analysis

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