Short Interest Ratio
Definition of 'Short Interest Ratio'
A sentiment indicator that is derived by dividing the short interest by the average daily volume for a stock. This indicator is used by both fundamental and technical traders to identify the prevailing sentiment the market has for a specific stock.
Also known as the "short ratio".
Investopedia explains 'Short Interest Ratio'
This ratio provides a number that is used by investors to determine how long it will take short sellers, in days, to cover their entire positions if the price of a stock begins to rise. The short interest ratio can also be applied to entire exchanges to determine the sentiment of the market as a whole. If an exchange has a high short interest ratio of around five or greater, this can be taken as a bearish signal, and vice versa.