On every MB you see posts about how the poor "shorts" are going to get burn. Those people don't have any idea how "shorting" works in the big funds.
Here is some information about stock manipulation games the small investor can't play and how "shorts don't just short and also go long to make a profit. The trick is NOT TO DO WHAT THEY WANT YOU TO DO !
Manipulating stock prices legally is actually fairly easy.
The problem for individual stock investors is they don't have ready access to these techniques and, consequently, often end up on the losing end of these schemes.
Here's what happens, although there are many ways to accomplish the same result:
A big institutional investor (hedge funds, mutual funds, insurance companies, and so on) picks a stock that it owns and begins selling.
As it dumps the stock on to the market, the price begins to fall. Other investors unload the stock and the price continues to fall.
At some point, the institutional investor decides it is time to jump back in and it begins an aggressive buying program. Soon, other investors notice the price rising and they buy also pushing the price up higher. The "shorts" not only are BUYING at the low, they are buying on the way up setting up "panic buying" which goes past the true value of the stock at which time they "SHORT" again.
Once the price is sufficiently high, the cycle can begin again.
What has happened is the institutional investor through its purchasing power can drive prices down and then buy back into the stock at a low price.
It rides that price up as others join the rally and pockets a hefty profit.
This is called the slingshot effect and was described in a much-quoted article back in 2009 by Jason Schwarz.