seems like the short everybody has been

Discussion in 'Trading' started by rowenwood, Feb 4, 2004.

  1. waggie, I would take just the opposite viewpoint when it comes to stops -- traders that prefer to try and catch tops and bottoms do so precisely because it allows them to set tight stops, while trend followers must sit through very large drawdowns. Entering mid-trend is perhaps the most problematic when it comes to stops; by the time the trend is broken, you will have to take a relatively large hit if you were not in very early in the trend.

    I agree with you that following a trend puts the odds in your favor, but I would also add that the older the trend, (especially one with little or no correction) the greater the risk for that trend to break sharply. This is just a function of psychology, in that after a while, everyone just goes bullish and acts as if we're never going to pullback at all which leaves the downside exposed.

    As for your last statement, for me I will usually always try to initiate shorts into new highs (that is, when I am bearish and looking for a short entry), especially when it looks like stops are getting hit and the move is fast, for once the volatility dies down, I know precisely where to set my stop, which is simply one tick higher than the high of the spike, and with that I am comfortable.
    #31     Feb 5, 2004
  2. Mecro


    Trying to catch the precise top or bottom is a sure way to lose lots of money. I've learned this the hard way, hence I rarely attempt to catch either. Yet, nevertheless, there are numerous traders still attempting to do this day in and day out. Great, more money for me.

    This is what happens when you try to catch the top. If you are wrong, you get hurt. If you are right, you then have to sit through the shake outs which is pretty much impossible to do most of the time. Because of your tight stops, a slight wiggle will shake you out in a second and you may have been right the whole time. But hey, thats how top and bottom catching works, you have to stick to tight rules.

    Lets say you catch the top. Since top callers are not fans of trends, how do you expect to capitalize on the move? An intermediate bottom will shake you out (with a profit of course). But the overall trend is where the big money is.

    You know, ever since this market rallied back in april, non stop top callers have been popping in and out. And now, we finally have a slight pullback from the trend, and supposedely all this money is made by top callers. Yeah right. The real money was in the trend for months. And this little pullback is chump change comparing to the real move.
    #32     Feb 5, 2004
  3. The whole idea is not to catch the precise top -- tops don't work like bottoms where usually everyone can identify the exact moment where the panic selling ends and we reverse hard. Tops take much longer to work out -- last month was a perfect example, I'll bet not one person can off the cuff remember the day the (so far) top was made. Instead a better way is to sell in pieces, and start to push harder only when the momentum seems to have subsided; this CAN be accomplished using relatively tight stops, all that's needed is a bit of persistence and some timing.

    It may take a few tries, but if that's the trade I feel holds the best risk/reward at the present time, the prior trend doesn't make a difference. But for me this is the only way I can sit through all the attempted rallies that I know will come even if the ultimate top has been made. And who says top catchers aren't fans of trends? To catch the end of one trend and the start of another is the ideal goal.

    The most agile bulls riding this trend would have lightened up on the trade on each spike, saving ammo to reload when profit-takers brought the prices down to support lines or MA's -- this never seems to get anyone riled up. But a short who sells at the same time those bulls lightened up gets called a pariah for trying to catch a top, just because they are initiating shorts instead of "prudently trimming" a long -- it's an unfair distinction.

    In any case, if bulls are just sitting on their hands every time the market turns, then great -- more money for me too!
    #33     Feb 5, 2004
  4. TD80


    Rowen my technical model shows CRXA a buy in this 6.00 area, stop and reverse at 5.85 for a new downtrend if hit. I show a near-term range developing and this looks like the bottom of it. If it hits stop then odds are a new downtrend is starting and look out below.

    No position in it here, but goodluck and I hope it works out for you.
    #34     Feb 5, 2004
  5. your advise is well taken, and it's reasuring as well. To be with a certan understanding of your advise, if CRXA closes any day at or below 5.85 then a new low is in the making, or do you mean that if CRXA ever sells for 5.85 then a new low is in the making?
    #35     Feb 5, 2004
  6. TD80


    I think if 5.85 is hit, odds are we will at the least retest recent lows, and very possible of a new low. The previous downtrend has been stopped and it looks like we are in congestion here. Not sure if this thing is going to start a new uptrend, I think it's more likely to range for awhile.

    That said inside of a range, it can be pure chaos. Odds are if the stock makes another turn down here it will go through the lows of the recent leg down in order to take out stops, and could very will turn right around and run back up.

    Right now I would say you a looking good. If it's a range you're probably in right around the bottom, and 6.65 is not out of the question on a rally in the very near future.

    #36     Feb 8, 2004
  7. yeah, I'm going to buy 1000 shares every week until....thanks again.
    #37     Feb 8, 2004
  8. CRXA is looking bullish now isn't it. So is most eveything else, but it is starting to look good for you rowenwood. :)
    #38     Feb 12, 2004