Overview
Net Shorts measures the net short bias extracted from order book depth data. It quantifies how much selling interest (ask-side depth) exists relative to a baseline, revealing passive seller positioning before trades execute.
This is the sell-side counterpart to Net Longs. Together, they provide a full picture of order book positioning.
How It Works
The indicator analyzes order book snapshots and computes the net short bias at a configurable depth bucket. The depthIndex parameter controls how deep into the ask side of the book the measurement reaches.
Chart Type
| Property | Value |
|---|
| Type | Subchart |
| Position | Below main chart |
| Data source | Order book depth snapshots |
Settings
| Parameter | Description | Default |
|---|
| color | Bar/line color | #ef4444 |
| depthIndex | Depth bucket to analyze (0-9) | 3 |
| displayMode | Rendering style | columns |
| highlightAnomalies | Flag statistical outliers | false |
| anomalyThreshold | Standard deviation multiplier | 2.5 |
| anomalyPeriod | Lookback period for anomaly stats | 30 |
| gradientIntensity | Fill gradient strength (0-1) | 0 |
Depth Index
| depthIndex | Typical Range | Use Case |
|---|
| 0-2 | Near best ask | Scalping, short-term positioning |
| 3-5 | Mid-depth | Swing trading, general analysis |
| 6-9 | Deep book | Institutional positioning, macro view |
Interpretation
Rising Net Shorts
Increasing short positioning in the order book signals growing selling interest. Passive sellers are stacking offers, which can act as resistance or signal informed selling.
Declining Net Shorts
Sellers pulling their orders reduces overhead supply. This often precedes breakouts as the resistance above price thins out.
Net Shorts at Key Levels
Spikes in Net Shorts at resistance levels often precede reversals. When sellers aggressively stack orders at a technical level, it reinforces that level as a ceiling.
Divergence Signals
| Net Shorts | Price | Interpretation |
|---|
| Rising | Rising | Sellers positioning against the rally — potential reversal zone |
| Rising | Falling | Sellers piling on — trend continuation likely |
| Falling | Rising | Resistance thinning — breakout potential |
| Falling | Falling | Sellers covering — potential bottom forming |
Anomaly Detection
When highlightAnomalies is enabled, periods where Net Shorts exceed the rolling average by more than the configured threshold are flagged. Anomalous spikes in short positioning often precede significant moves.
Net Shorts reflects passive positioning (limit orders in the book), not aggressive selling. For active selling pressure, use Delta Volume or CVD.
Practical Examples
- Resistance reinforcement: Net Shorts spike at a known resistance level — sellers are defending aggressively.
- Short squeeze setup: Net Shorts elevated but price starts pushing through — trapped sellers may be forced to cover.
- Breakdown signal: Net Shorts building during consolidation at support — potential breakdown.