As of today I have a big short position in the Russell 2000. I am trading the IWM.. and my avg short price is $120. I have roughly 50% of my trading account short.. and I will be continuing to scale into any strength throughout the coming days. My goal is to become 100% short in my trading account... and preferably to scale at prices above $120. Yes.. I might be wrong in the coming days and we may just rocket higher.. but this is not a scalp trade nor short term trade. My first target is a pullback to the 115 area where I will cover a fraction of my position.. then $110... and I will be holding some more in case we have a market crash.
I know everything in the economy "looks" great and all the eco# coming out are bulish... but I think the best risk to reward trade is to the downside. I dont have some cute technical pattern or chart fibo that is behind my reasoning to get short... nor is it just a pure gut trade. But I have made the case in many threads and I stand by it.. and I am puting money where my mouth is. http://www.elitetrader.com/vb/showthread.php?threadid=30118
Many people on ET are short term traders.. believing they can make money on every wiggle and waggle in the futures... which as we all know is the most difficult type of trading. Therefore.. this thread has of no value to them. But for the people that trade longer term... and can see past a quick scalp.. this thread is for you. I honestly believe that people on ET are chearleading this market.. and are extremely bullish as the market tops outs. I believe that we are in the process of building a top. I think the market at best will be range bound.. and worst case we get a massive crash similar to 1929 if not worse... soley based on the popping of the debt bubble. I believe interest rates will rise much faster than most thing.. and we are doomed for a long period of stagflation. If you couple that with terror and geopolitical fears... going heavily long here is very gutsy and risky. I actually give the most repect to the UK central bank for realizing this problem quicker than us and taking care of it much more aggressively. Their finance ministers have correctly identified a housing and consumer debt bubble in their economy and are taking swift and appropriate measures. Greenspan is in serious trouble. He is scared to start raising rates.. which we all know he should be doing because he realizes that the whole housing market/ consumer driven economy would be derailed. So he continues to make excuses to keep holding rates low as inflation becomes rampant in our country. His only hope is to orchestrate some type of soft landing.. which is impossible because consumers are leveraged at unthinkable levels. I know most people are gonna say... hey it doesnt matter... we will just continue doing this and everything will work ut at the end... top picking is stupid and u shouldnt fight the trend. But I believe a major crash is in the cards.. and there are many stats that are triggering alarms.
Some research by LBR "In our previous correlation studies based on the strongest mark ups in the DOW that have occurred over the past 35 years, a trading range formed that lasted anywhere from 3 - 8 months in duration in 90% of the cases. Tradable rallies lasting anywhere from 1 - 2 weeks setup when the market tested the lower end of the range."
Why short 50% of your trading account just because you think so. Why gamble? I remember people shorting SIZE at DOW 10,000 and getting burned!! Be careful dude... Oh yeah Short TASR like all those clowns did at 60
Good thing u are a newbie. There is a big difference between an index and a stock. Indices barely move much most of the time. A %10 move on your avg index is considered pretty big. Something like TASR can move %10 in a blink. Shorting something because u have conviction and solid reasoning as to why the market could be trading lower in the coming weeks/months.. is not gambling. --MIKE
you seem new to the stockmarket my friend, FYI in stocks the best risk /reward is most of the time to the upside , and right now we are in "the most of the time" part, actually I may be wrong we might be in one those exceptional time when stocks skyrocket.
I dont make major bets to the short side on my account using stocks.. thats how u blow up. Most traders have a very short term horizon... my position probably will be multi month..that is beyond the domain on most ET traders.. who scalp the ES for 2 points. --MIKE
How about shorting ER2 instead? Less capital intensive.... giving u more to work with when scaling into positions.
I prefer dealing with the IWM now because it allows better scaling... when I get big enough to trade atleast 10 ER2.. then I will trade it.