Im coming out of the closet...

Discussion in 'Trading' started by michaelscott, Jul 14, 2007.

  1. Its not popular having the Napoleon complex and being short. In fact, there are high emotions of the crowd ready to dump piss and vinegar on you when you are short.

    The simple facts are that:

    - stocks tend to fall faster then they rise. months of gains are wiped out in a day, days or weeks.
    - its easy to identify stocks that dont seem to be trading with the market
    - its easy to identify stocks that are simply bad
    - even in a crazy rising market, there are always certain stocks stinking and sinking. For example, 50% of the market was down on Friday even though the indexes demonstrated an upward trend.

    Earlier in the year, I was using a long/short strategy. However, my greatest mistake in trading that strategy is that I was unable to focus or specialize. I was using a generalists approach, but I wasnt specializing which is a mistake in any field of work. Generalists tend to know a little about everything, but dont know a lot about any one thing.

    My most successful shorts have been the most obvious stocks that are stinking and sinking. To name a few are AMR, KOMG, BRLC, CC, TWTR, JBLU....

    The long positions I had did well, sometimes. I have modest returns trading long...however when I traded the stocks that were obviously stinking and sinking then I realized a lot of money. I made a 400% return on trading the puts on AMR and have doubled my cash with CC and BRLC. For some reason, these stocks stopped trading with the overall market a long time ago and you knew that they would fall faster and harder.

    Actually, I found myself researching my shorts a lot more closely then the longs. For example, I know an accountant from Ernst&Young who audits public companies. I never asked her before to look through a 10-Q with me for any of my long purchases. However, before I went short a company, I found myself combing through the 10-Qs and financials. Heavily researching my positions.

    The least successful shorts were trying to fade popular stocks. I found it better to short stocks that were already in a downtrend and that had bubbled up. You may have seen me saying to short RIMM and a few others. The stop-losses went off quick on those.

    From this point forward, I will not long anymore stocks. Its simply not worth it for a trader to long a stock. It doesnt climb fast enough for one and it carries lots of risk. Now thats my opinion of course. Others have a different logic. I've made a 400-1000% return on some stocks shorting them and buying the puts.

    My most successful short was Transmeridian (TMY) where I made a 1000% return trading in and out of it. Cramer loved this stock last year and the attention never faded around it. I didnt have to comb through the 10-Q to know that this was a POS.

    Trader Tim is a smart man. He is not actually bearish on the market, its only his strategy that is bearish. He does very well with puts and makes awesome returns. As I said earlier, its easy to find stocks that are not trading with the market. Those that do not trade with the market often crash down very quickly.

    Jesse Livermore loved to short the market and realized untold riches in doing so.

    At some point, the crowd exhausts itself from a certain stock and it just starts to trade under moving averages then just falls through the trap door.

    Another great vehicle is puts that seem to double, triple and quadruple within days or even hours when all is not well. Many people on this board pat themselves on the back when they have held a stock for months and it has quadrupled. However, I have held puts that did that in just a few days during a time of panic.

    I have posted several times about longing positions, but secretly shorted stocks in the background knowing that others would give me piss and vinegar for doing so.

    However, I am coming out of the closet and joining TraderTim in the most successful strategy of our time. Shorting the market. This was Jesse Livermore's trade of choice so now it will be mine. No more longs. Just make money the good ole fashioned American way, the way the best traders have done so, through careful shorts and distorts.
  2. You should be telling this to your doctor; not us.
  3. If only your doctors saw this video of you they'd certainly rein in the ritalin prescriptions:


    Is that your "I just made enough money to buy 100 cheeseburgers" dance?! :p :confused:
  4. It is easier to jump off a cliff than scale Everest.
  5. Livermore shot himself in the head...
  6. Livermore was not only a short...he playing in the direction of trend in most cases.

    He would do some testing near tops when it appeared to be weak. If test was valid he would then add to position.

    But not only a bear
  7. Well we can only hope.
  8. What is your exit rule? How do you choose to cover your short position? How much risk do you use when you sell a stock short?
  9. Livermore saw shorting as merely another addition to his arsenal. He said he was better than most traders because of his disposition to go either long or short and not have any market biases..

    What you have going for you is a good strategy though if it has been working great for you so far, which apparently it has.

    In a bull market though most things will go up, and if you traded calls you can get the doubles and triples too.
  10. patoo


    I was laughing very hard on 7/12 around noon EST. I thought about how nuts you were to miss that move.

    So, not only did you miss it, but its going against you!



    (hang in there its bound to go down sometime)
    #10     Jul 14, 2007