A Beginner's Guide to Using Short Selling Data

If you've ever wondered why some stocks appear in the news as "heavily shorted" or heard someone mention "short interest" and weren't quite sure what it meant — this guide is for you.

Short selling data is one of the most underused tools available to everyday investors. It's publicly available, updated daily, and can give you genuine insight into what sophisticated market participants think about a stock. Let's break it all down.

What Is Short Selling?

Short selling is when an investor borrows shares of a stock and immediately sells them, hoping to buy them back later at a lower price. The difference between the selling price and the buyback price is their profit.

Think of it like this: you borrow your neighbour's lawnmower, sell it for $500, then wait for lawnmowers to go on sale. You buy the same model for $350, return it to your neighbour, and pocket $150. That's short selling — but with shares instead of lawnmowers.

The key insight: short sellers are betting that a stock's price will go down. When lots of people are making that bet, it tells us something about market sentiment.

What Is "Short Interest"?

Short interest is simply the total number of shares that are currently sold short on a particular stock. It's usually expressed as a percentage of total shares on issue.

For example, if a company has 100 million shares outstanding and 8 million of them are currently sold short, the short interest is 8%.

What the Numbers Mean

| Short Interest | What It Suggests | |:---|:---| | 0–2% | Minimal bearish interest — quite normal | | 2–5% | Moderate — some investors are cautious | | 5–10% | Elevated — meaningful bearish sentiment | | 10%+ | Very high — significant number of investors betting on decline |

Where Does This Data Come From?

In Australia, short selling data is remarkably transparent. The Australian Securities and Investments Commission (ASIC) requires all market participants to report their short positions daily. ASIC then publishes this data, which anyone can access.

This is actually better than many international markets. In the US, for example, short interest data is only published twice a month. Australian investors have a genuine data advantage here.

Why Should You Care?

Short selling data gives you a window into what informed, professional investors are thinking. Here's why that matters:

1. It's a Sentiment Indicator

High short interest means a lot of investors — often institutional ones with significant research budgets — believe a stock is overvalued or faces problems. That doesn't mean they're right, but it's worth understanding why.

2. It Helps You Ask Better Questions

If you're researching a stock and discover it has 12% short interest, your next question should be: "Why?" Digging into that answer often reveals risks you might have otherwise missed.

3. It Identifies Potential Volatility

Heavily shorted stocks tend to be more volatile. If you own one, being aware of the short interest helps you prepare for bigger price swings.

4. It Can Signal Opportunity

Sometimes the market overreacts. If you believe a heavily shorted stock has solid fundamentals and the bears are wrong, the eventual short covering could boost your returns.

How to Start Using Short Selling Data

Step 1: Check Your Holdings

The first thing any investor should do is check the short interest on stocks they already own. Are any of your holdings heavily shorted? If so, it's worth investigating why.

Step 2: Monitor the Top Shorted List

Keep an eye on the stocks with the highest short interest on the ASX. This gives you a sense of where bearish sentiment is concentrated. You can see this daily on Shorted.com.au.

Step 3: Watch for Changes

A single snapshot of short interest is useful, but the real value comes from tracking changes over time. Is short interest rising or falling? Rapid changes often precede significant price moves.

Step 4: Combine with Other Research

Short interest should never be your only input. Use it alongside:

• Fundamental analysis: earnings, revenue, cash flow
• Technical analysis: price trends, volume, support and resistance
• News and announcements: company updates, industry developments
• Valuation metrics: P/E ratio, price-to-book, enterprise value

Common Beginner Mistakes

"This stock is heavily shorted, I should buy it!"

Not so fast. Sometimes stocks are heavily shorted because they genuinely have problems — declining revenue, excessive debt, management issues. The shorts might be right.

"Short interest went up — time to sell!"

An increase in short interest is a data point, not a sell signal. Investigate why it's rising before making decisions.

"Short sellers are manipulating the market!"

While market manipulation does exist (and ASIC monitors for it), most short selling is legitimate research-driven investing. Short sellers have actually exposed some of the biggest corporate frauds in history.

Putting It Into Practice

Here's a practical workflow for incorporating short interest into your research:

Daily (2 minutes):

• Glance at the top shorted stocks on Shorted.com.au
• Note any stocks you own that appear on the list

Weekly (10 minutes):

• Check the risers and fallers — which stocks saw the biggest changes in short interest?
• Cross-reference with any news or announcements

When researching a new investment (5 minutes):

• Look up the stock's short interest history
• Compare to sector peers
• Investigate any periods of unusually high or low short interest

Getting Started with Shorted

Shorted.com.au makes all of this easy. We take ASIC's raw data and present it in a way that's actually useful:

• Daily updates so you always have the latest picture
• Historical charts to spot trends over time
• Industry breakdowns for sector-level context
• Weekly reports with AI-powered analysis of what's moving and why

You don't need a Bloomberg terminal or a finance degree to use short selling data effectively. You just need the right tool and a bit of curiosity.

Start exploring ASX short interest data →

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This guide is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a financial advisor before making investment decisions.