U got a point there, becoming a specialist on a few stocks. Then will not lose focus on seeing so many different stocks and so many industries. But u know, sometimes if u don't know what other stocks are doing, then somehow u are in line with the market, only focusing on the few stocks will not give u hint about what the breadth of the market is doing. Because the wide market somehow will affect the few stocks I'm focusing.
I see what u mean, use the hypothesis to figure out whether this industry will keep going up or will go down. Agree this need a bit of detective work. Currently, i'm basing my buy and short based solely on technical chart. I buy whatever goes up. But u know, as I'm reading intraday chart for 15 days, usually when i buy, it did goes up for 1 or 2 days, but after that, they came straight back down to my buying point, I got scare and quickly cover back. So after that, it is either I'm right that they went down or after that, they rebounce back. Either way, I did not profit or profit little if I take profit earlier.
Whether you follow 2 stocks or 6,000, consistently making money as a short is a very difficult trick. And unless you are very profitably trading the long side, it is something you should not put your attention on. I offer this advice from experience. There is a good reason why short funds, or even long/short funds, typically underperform the market.
These things are right in front of your face. Pick up the newspaper and make a list of the things happening right now. For example, LAB. The specialists going away was known for months, but I bet you didnt think of that. Sit down every Sunday and go back, look at whats going on right now and how that will effect the future.
You focus on the overall market by watching the PREM/Discount to FV of the futures (S&P). You have "peers" next to each of your children, so you see Relative strength within the sector. You watch ticks and trin, depth of book, breadth of book, and each trade whenever possible....all part of overall "tape reading"...takes some time, but when you master it, you'll see results. All the best, Don
And here is another little suggestion that you may find helpful. Don't short based on your prediction alone. For example, interest rates are rising, home builders are high as a kite. You predict the homebuilder stocks should fall. DO NOT SHORT. Monitor the stocks closely and wait until they show you that they are falling before shorting. When you short you want the momentum already formed to the downside. Don't worry about trying to short at the very top. You can never do it anyway, well maybe once in a lifetime. But on the other hand don't wait until the move is over. Get in there, grab the dough and keep grabbing until you get a signal that the down momentum is fading. You can always re-enter the position if the momentum picks up again. Never ever short just because you think the price is too high.
My advice here is to use varios different methodologies to confirm a buy.sell... for example. I just shorted GLD...why? 1. My backtesting shows that if I use will%r with a 13 period... i get a 70% annualized return long and short. I got a signal today. 2. It just broke below yesterday's low 3. It is at the top of a trend channel. 4. With a 59 entry..a 60.10 stop and a 55 target...it is a good risk reward. 5. If i am wrong, i have only lost 1/2% on the trade...but the potential gain is 3%+ There is MUCH more to it than "thinking" it may be too high. gotta do your homework and pay your dues.... Dan