Shorting is not easy too

Discussion in 'Trading' started by innovest_11, Oct 19, 2006.

  1. Thought the market is high, so short it, keeps going higher.

    Actually it is very difficult. U see a stock suddenly fly, then there are few scenarios can happen:

    a) then u thought that it is too high, so u short it, but it goes higher

    b) u thought it will go higher, so u buy it, next day, it drop, and following few days, drop further

    Same as u see a stock drop, then next day, it can shoot up or it will plunge further

    I thought of really using a dart, throw and randomly pick a stock, then throw coin to decide to short or long, maybe it will work better. Instead of depending on stupid chart or fundamental or news and been cheated
  2. Luke_P


  3. Suggestion: If the stock is in a solid up trend, don't short it hoping you found the top.

    Just an idea.

    Although your dart and coin system is just that - a system.
  4. If you find a stock with catalyst shorting works. Earning miss or deceleration in earning on a stock with long track record of good earning and nearer to its 52 week high can precipitate a down move.

    Look at stocks like Ebay, CHS, MCO, etc. There downslide started with earning miss or pre announcement of earning miss.

    The worst kept secret on Wall Street is earnings matter, anyone else who tells you otherwise is either a fool or selling you newsletter service or a TV pundit or a perma bear or a conspiracy theorist.
  5. Another suggestion: Don't short, it's not "overvalued"
  6. Kind of agree on miss earning can be used, but sometimes it is difficult too, because the downward movement is so fast n furious, by the time u want to short it, either it is not available, or it is too low. For example, u look at ups, last earning miss, drop like bomb, but lasted for few days only, after that, it slowly climb its way back. So where's the profit if u short it?

    By the time u short, it is always too late, if based on earning
  7. Most of my better traders don't like to "pick" stocks every day, long or short. Better to trade same 2 or 3 stocks (children stocks), day in and day out...become a "surrogate specialist"..... My nephew traders primarily GE, day in and day out..and does very well.

    Or, go one step further, stay market neutral with correlated pairs...simple and lucrative when done correctly.


  8. eagle


    GE! The elephant. Doesn't move fast.

  9. Your doing this the wrong way. Your shorting stocks at their low and trying to get that extra two bits. When you saw interest rates rising a year ago, thats when you should have been shorting the homebuilders, for example. Now you want to short the homebuilders and are wondering why the trade isnt going your way.

    Its too late to short them. They have been hammered all year round.

    I want you to print the following phrase out and place it by your tradestation

    "What the wise man does in the beginning, fools do in the end"

    Another phrase, short high cover low. Do not short low and cover high.
  10. Here is what you do to find good stocks to short.

    Look at a chart of stocks that have hit their 52 week high in the last month. Then form a hypothesis as to whether this stock will go higher or lower. This will involve a little studying of the financials and some time. Lets take for example, the homebuilders, 1 year ago. They were hitting their highs, but interest rates were going up. An easy hypothesis. Higher interest rates mean less homes built.

    Once you have made a list of different stocks and formed a hypothesis, then monitor these stocks carefully.

    Here is another good one that may be too late. Specialist firms. Electronic trading has come to the NYSE. It was found on the London stock exchange that 90% of the specialists were eliminated within a few weeks once full electronic trading took place. The specialist firms WERE an obvious short.

    This will take detective work. . .
    #10     Oct 20, 2006