Drawdown
Definition
The peak-to-trough decline in an investment's value, expressed as a percentage. Short sellers track adverse drawdowns to size positions and set stop-losses.
Related Terms
Volatility
The degree of price variation over time, typically measured as the annualised standard deviation of returns. Higher volatility increases option premiums and short-selling risk.
Stop Loss
An order that automatically closes a position once a defined adverse price is reached. For a short, a buy-stop above the entry price caps the loss. Cascading stop-losses contribute to squeeze severity.
Position Sizing
Determining how much capital to allocate to a single position based on conviction, volatility, and account risk tolerance. Conservative short sellers cap positions at 1-3% of portfolio NAV.
See short selling in action
Explore real-time ASIC short position data for ASX stocks.