Ive been squeezed to death since early July, since then I have been trying to catch a decent run on the short side, and have been always wrong This week and more so today, It did seem like the time finally might come. And yet everyday at 3:30pm the market is run up Can we expect to continue seeing this market behaviour in the future? Has shorting died? As an opportunity to profit? J
Why even bother trying to short a market that's trending up? Nothing wrong with shorting. Just wait for the right moment. Why pick tops?
Your problem isn't shorting, your problem is fighting the tape. You have a preconceived idea in your head that the market "should" go down, and so you keep trying to trade in accordance with that idea instead of reading what the chart is telling you. The chart has been saying "strong uptrend" since July, and you have been fighting it all the way. You will never make money that way. Change your mindset so that the chart is always right, and never enter the market with a preconceived notion about what "has" to happen. This rally could end here, or it could easily go for another 150 points. Nobody knows. Stop trying to pick tops and bottoms, that is the #1 rule for successful trading.
So if I am day trading, I should look at previous week and day trend, and only take trades with trend to be safer until I see for example a day that takes out the low from the previous day, and then look to play the short side. Or do I just trade based on my current chart if i see short. For example, I get both long and short signals, so even though some of these short signals do make money, I should filter them out until I am sure bear market comes back?
Read this post. It might help you to understand why you always fight the trend: http://www.elitetrader.com/vb/showthread.php?s=&postid=2560363#post2560363
I can't tell you exactly what your trading system should be, but basically here is how you need to break things down: 1. Determine somehow whether the market is trending or range-bound in your chosen time frame. You'll have to figure out for yourself how to do this. 2. Assuming you decide that it's trending, look at the trend direction, and wait for a pullback. Your pullback criteria should be well defined, and you should know where you are planning to enter. You can use trendlines, MAs, or whatever you want. 3. When you enter, either it will go your way or you will get stopped out. If it goes your way, decide what the criteria are for getting out. You could decide to hold it until the major trend gives a sell signal (again, you can figure out for yourself what that is), or you can sell it when you think it's overextended with the idea that it will pull back and you can get in cheaper for another leg. 4. Unless you are very, very good, do not trade counter-trend. Even then the risk/reward is probably not worth it most of the time. You have to be VERY picky on your counter-trend trades, and it's not for beginners. 5. DO NOT try to pick the top or bottom when the market is at its most extended. Tops and bottoms take time to form, and it will make at least one attempt to break through before it reverses. No need to pick the exact top or bottom, ever. It's about that simple. The real trick is determining trend vs. chop, and getting a good system that allows you to take the most out of trends. You can also trade a range-bound system in the chop once you determine that the market is in that condition, if you like.
Every active participant noticed that the markets have become harder to (swing) short. It is not necessarily that the original poster was acting against the tape. Perhaps he has simply reacted on a larger downmove and expected this swing to last a little longer than the morning session. Before July it was the case where every downmove could yield some handsome profits for the bear until the next swing up occurred. It was fun to ride the 30-40 S&P points up and down since March. I used precisely the same setups in July and it didn't work any longer so I stopped shorting. Have to adapt to changing market conditions. Historically seen, shorting a market with VIX below 30 has not been rewarding anyway.
Thanks, I may stop trying to counter trend trade for awhile, since I got hurt doing that yesterday mainly by not having a hard stop set which would have limited the losses.