Stop Loss on short stocks.

Discussion in 'Stocks' started by jupiterstudios, Nov 17, 2007.

  1. Im looking for an answer. Does anyone know how to create a stop loss for shorting a stock. What I want to do is at night when I buy stocks to short, I want a stop 10 percent above the price (and I want it to move down as the stock moves down, and 30 percent below. (To lock in a max of 30 percent profit.)

    Or just a simple stop loss for shorted stocks. So if I buy it at 40 I want to sell if it goes to 45.

    Jim C
  2. harkm


    Your post is very confusing. Remember, you are SELLING when you sell short and Buying when you close out your position. So, just put in a buy/cover stop above the market for your stop order if you are closing out your position.
  3. have a stop loss 10% above your price to bUY to cover and place BUY only order below your short . next day your broker'll adjust the position . i do it once a while
  4. piezoe


    If you are selling short, what you want to use is a "buy-stop" order. This is an order that will become a market buy order if the price goes above the stop price you specify. If your software allows it, as an alternative you could use a trailing buy-stop order. This would start out with the buy point at the value you specify above the entry price and as the price moves down in the desired direction the trailing buy-stop will move down as well. If the price moves up towards the buy-stop, the trailing buy-stop price does not move up. And, of course, if you are not going to be around to close out the trade when it reaches your target price you will also need to enter a buy-limit order, as suggested above, at your target price. Usually you would have the buy-stop order and the buy-limit order linked together as OCO orders, or One Cancels the Others, so that execution of either order causes the other order to be canceled.

    I am not recommending anything in particular here, but simply trying to answer your question. Look carefully at the definitions of the various kinds of orders you can use, and try using these various kinds of orders on a simulator before using them for real. Good luck.
  5. Figure out your short entry criteria.

    Set your Buystop = Entryprice * 1.1;

    // using a % is not a good idea - ATR(10) or Stdev(C,10) is better on EOD stocks.

    If Short is true AND C > Buystop, then Cover

    Any decent backtester will carry the above code as active until stopped out or you introduce another type of exit.

    In my experience you can't create a profitable strategy shorting using just a stop loss criteria alone, otherwise your system will behave stupidly, shorting at the bottom of a trend channel and covering in a rally...

    There are all kinds of technical issues that creep up like having your entryprice changed to a later signal entry... which happens all the time when trying to code a shorting strategy using a backtester like Amibroker. So for each active trade you have to block out changes in the Entryprice values....
  6. Thanks so much for all the awsume info. Yes I did mess up and say I wanted to buy a short stock instead of selling a short stock.