Q. What is short-covering? by Jamie Coleman

Short-covering is when traders who are short the market close out positions. If the market as a whole is short, the covering of shorts will make prices rise, making bears nervous. The higher the market goes, the more nervous the shorts get and the more they cover.

The opposite is profit-taking. It is the same psychology as above, just describing selling.

For instance if the Dow fell 100 points this afternoon, all the news wires would describe it as profit-taking after a long rally…

Source: Jamie Coleman

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