Short-covering refers to short-sales opening a position at a high level, and buying and closing the position when the price drops to a satisfactory level. At the same time, it causes the price to rebound temporarily, but cannot rebound to the original height, which is equivalent to a short profit out.

Short-covering refers to the behavior of investors who were originally short in the foreign exchange market (sell first) when the trading direction and the position they hold are forced to liquidate or backhand long (buy) when the trading direction and the position they hold are reversed.

Since the original investor was short-selling, the direction when signing the futures contract was to sell, and it was necessary to buy it when closing the position. In this way, the original short position has become a long position, which has contributed to the increase in prices. If the number of futures of a certain variety is relatively small, and one party has sufficient funds, it may continue to raise (or lower) the price and force The opponent forces the liquidation of the position, so that the price continues to develop in a direction that is beneficial to them.

Foreign exchange short covering

Long covering refers to the behavior of investors who were originally long in the futures and foreign exchange markets (buy long first) when the trading direction and the position they hold are forced to close out or backhand short (sell). Investors are long, and the direction when signing a futures contract is to buy, and when the position is closed, it needs to be sold. In this way, the original long position becomes short, which contributes to the price drop. If a certain If the number of futures of one type is relatively small, and one party has sufficient funds, it is possible to continue to raise (or lower) the price, forcing the opponent to forcibly liquidate the position, so that the price will continue to develop in a direction that is beneficial to it.

Generally speaking, short covering will help the exchange rate rise. The difference is only a low rebound after a fall or an accelerated rise in the process of rising. In other words, the rise caused by short covering usually does not last long and the amplitude is relatively limited, and after covering is over, there are often further downward movements.