Hello, Please help me find direction on how to develop a set of rules that can be used to develop an automated system that goes short only profitably. I can't get over this idea that one can automate a shorting strategy for stocks. Anyone help would be greatly appreciated. I have good systems that go long only. But they just sit out a Bear market. I think there has to be a way to to short mechnically.... Please do help, Thanks, Rajiv
Hi Bearbelly, I did not mean short "only profitably". I meant "Short Only" system that is profitable. Thanks, Rajiv
Following is the output of a moving average crossover system. Input data is about 10 years of Standard And Poors Index Tracking Stock symbol SPY daily price data. Trades are long term. I do not find profitable results when testing shorter term trades using this system. I did not test time constants less than 10 days. Use of shorter time constants might test profitably. I do not remember testing this program thoroughly. I show this only as an example of a moving average crossover system that trades short positions only. Generally speaking I find much better simulation results trading stocks using long position trades than short position trades. === FastTimeConstant is 40 SlowTimeConstant is 100 ATR_Multiplier set to 10.00 Name of data file is SPYdaily.txt Long or short is: short positions only Heat is 10000 Initial capital is 100000 Slippage and commission per transaction is 100.00 ==================================================================== 12-Jul-94 OHLC:[ 37.05 37.05 37.05 37.05 ] short sale at 37.12 size 3167 Dollar Position Cost is 117559.04 22-Jul-94 OHLC:[ 37.49 37.49 37.49 37.49 ] cover 37.55 Position Net Gain Or Loss is -1362 Subtotal profit $ -1362 20-Nov-00 OHLC:[ 123.26 123.26 123.26 123.26 ] short sale at 123.89 size 514 Dollar Position Cost is 63679.46 9-Jun-03 OHLC:[ 92.81 92.81 92.81 92.81 ] cover 93.75 Position Net Gain Or Loss is 15492 Subtotal profit $ 14130 Number of trades 2 Total profit $ 14130 Profit after subtracting $ 100 commission & slippage per transaction: $ 13730 InformationRatio is 0.84 Heat is $ 10000 per trade Drawdown is 0.0136 Initial capital is $ 100000 Slippage and commission per transaction is $ 100.00 Uses 20 period average true range to calculate position size Trades only short positions.
I don't use automatic systems but I do have a written plan for long and short trades. This is for swing trades, not daytrades.
Sure, there's a long bias on equities. But as long as Buy/Hold traders and Mutual Funds have drawdowns, there are opportunity for speculators.
I stopped my short mechnical trading strategies simply because I couldn't get a fill sometimes on the shorts because my broker couldn't borrow the shares. So, the backtesting resulted in great performance, but when I implemented it, I missed out on a number of profitable trades due to real world conditions. Trading long is much easier IMO. -Mike