What is the Short Selling action in the Capital Market ?

What is the Short Selling action in the Capital Market ?

Short Selling is a term or behavior where someone makes a sale first before making a purchase. This means we sell first and then we buy the goods later. In this context I talk about it in the world of shares. So if we sell the stock first then the price moves down, we will get profit because we can buy it at a cheaper price. But don't ask if it's the opposite. Surely it will be a loss because we sell it cheaper and buy more expensive.

The purpose of short selling is one of them to be able to produce a more volatile market in the stock market. Because if the shares have to be bought, there will only be one-way transactions. However, if we are allowed to sell first, it means that if the stock goes down, we can do short selling to profit and buy or buy shares to get profit when the stock price rises.

At first glance there is no problem, but if we study further there is a question, "Why can stock indexes that have fallen so low can still sink deeper?" Yes the answer is one of them due to short selling. Short selling is an action that is actually not wanted by investors, company owners or issuers even the stock exchange. Because which stock or company wants the value of the stock to go down? That's really true. Basically the concept of a stock is a unidirectional investment that is upward rather than downward. The rise and fall of prices is expected from the mechanism of demand and supply. But short selling is more synonymous with speculation. So that at one time it actually made things worse.

When prices are right at support, usually big traders see the state of the global market. Is there a good sentiment to be able to reverse the direction of the trade (reversal / rebound) but if there is any, before rising again made a mechanism "press price" on the support so that people who use stop loss on the support affected by selling action. This price press action one of which can use the short selling feature. Now in Indonesia the IDX has banned and does not allow short selling actions on the exchange. Because some time ago, the collapse of the Indonesian stock market was thought to be a result of the short selling behavior of its bursana participants. But I explain this because in investing in global markets such as America, the practice of short selling is only natural.

Different conditions are when the support is touched and the global market does not support short selling, it is used to get profit with the initial scenario when up to a certain point there will be a buy or long action with a price scheme lower than the time of short selling. And there are other people or traders, or whatever they are called short, so that the price of the shares slips further and deeper, which affects many people who carry out margin transactions to sell their shares. So the decline is deeper. This is where a worse price scenario can occur.

The sharp decline in the Indonesian stock market in 2013 could not be said to be the result of short selling because short selling was not permitted on the stock exchange by the IDX, the sharp decline in the exchange could also occur due to margin transactions.
How to avoid yourself from Short Selling losses?

So that we are not trapped in market conditions that are affected by short selling is not to trade using margin. Margin is a transaction that uses leverage from a broker. Which must be paid off with a certain period. But if you are happy with margin transactions, they still have the highest discipline in entering or leaving the market in a state of profit or loss. Because we will never know whether the rain will stop in 5 minutes, 5 hours, 5 years or not stop again :)