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Hi Karyn,
Many thanks for your contribution.
You've raised very valid points, especially
regarding stop losses - I agree with your observation.
Regards,
Cris
----- Original Message -----
Sent: Thursday, March 25, 2004 2:19
PM
Subject: [sharechat] Short Selling
Conditions
Short selling doesnt have much effect on a market as there are
VERY strict
conditions placed on such sales by the stock market. It
is not something
that everyone can do, even if they wanted to, unlike
buying shares.
eg. only a limited number of companies can be short sold,
only a small
percentage of their shares may be short sold in any one day,
sales must
usually be settled within 3 days, requirements for margin
cover, etc ...
for more detailed information see the ASX conditions
at
http://www.asx.com.au/markets/l3/ShortSales_AM3.shtm
Automatic
stop losses are a more potent tool to put a market into a
spiralling
decline, and indeed has been given as the reason for the big "one
day"
market crashes that have occured - ie. as the price falls,
pre-determined stop losses are triggered, the stock is sold automatically
without human intervention, the increased volume of sellers pushes the
price
down, triggering more stop losses, and so on.
Now that people
can set auto stop losses via online brokers, it will be
interesting if we
see the same type of volatility in the Aust markets as has
been seen in
the
US.
Karyn
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