"Too many retail traders" vs shorts?

O

Option Trader

A very successful trader on this board once advised me to pull out of a stock in part because "for every share held short, there are almost double as many shares held by retail longs". He was 100% right, and I was 100% wrong.

What is the significance of such a ratio? Is that really such a danger sign straight across the board?
 
I wish someone would tell that to the fertilizer producers or shorts.



Quote from Option Trader:

A very successful trader on this board once advised me to pull out of a stock in part because "for every share held short, there are almost double as many shares held by retail longs". He was 100% right, and I was 100% wrong.

What is the significance of such a ratio? Is that really such a danger sign straight across the board?
More...
 
I assume its a way to gauge how optimistic people feel about the stock..

the theory if everyone is aboard, than it can only signal the top.

but i dont know if 2:1 longs versus shorts is that significant point, where the tide would turn,

this is just a simply model, it completely ignores other variables, like how many people actually hold the stock, how many people are on the sidelines.. etc..
 
Quote from Option Trader:

A very successful trader on this board once advised me to pull out of a stock in part because "for every share held short, there are almost double as many shares held by retail longs". He was 100% right, and I was 100% wrong.

What is the significance of such a ratio? Is that really such a danger sign straight across the board?
More...

That's pretty interesting. It might be worth a look to investigate % of short interest to institutional ownership.
 
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