Is it stupid to short the top % gainers of the day?

K

koonsdawg

Do you guys think it is stupid to short the top % gainers? I have found a little strategy that I think works very well. But I am not a seasoned trader and wanted to get your opinions. I have been shorting the top % gainers of the day. I figure what goes up that fast must come down. At least a little. So what I have been doing is shorting the stocks when I think they are at their peak. What usually happens is the stock will end up somewhere in the middle. What I mean by that is this. If a stock closed at $5 and then the next day jumps to $10 it will end up usaully around $7.5 give or take. Does anyone else do this?

One really good example of this that has happened recently is CPSL. It was on the top ten % gainers for the day and then the next day it dropped.

Any thoughts appreciated..
 
You should probably find a way to test this before you trade it live. Shouldn't be too hard to do in tradestation, wealthlab, etc.
 
How do you test it before trading it? I have actaully been trading like this and have made over 38% gain in four months. And I tought a friend of mine how to do it and he has made 50% gain in four months. This is all real money not paper tradinig. But I am interested in learning on how to test my strategies.
 
Quote from koonsdawg:

Do you guys think it is stupid to short the top % gainers? I have found a little strategy that I think works very well. But I am not a seasoned trader and wanted to get your opinions. I have been shorting the top % gainers of the day. I figure what goes up that fast must come down. At least a little. So what I have been doing is shorting the stocks when I think they are at their peak. What usually happens is the stock will end up somewhere in the middle. What I mean by that is this. If a stock closed at $5 and then the next day jumps to $10 it will end up usaully around $7.5 give or take. Does anyone else do this?

One really good example of this that has happened recently is CPSL. It was on the top ten % gainers for the day and then the next day it dropped.

Any thoughts appreciated..
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Don't do it.
 
If you are making 10% a month the last thing you need ia advice from people on ET......

I would start small and add size every time you make a certain amount of money, maybe $1000.

If you have a few losers in a row then you need to find out what you did wrong.
 
Quote from spinn:

If you are making 10% a month the last thing you need ia advice from people on ET......
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exactly..why ask for someone opinion if you are successful and confident about what you are doing?
i don't get it.
regarding backtesting-it's relatively easy to test.not so easy to find out,if stock was shortable from your broker on that day.
i give up on similar strategy,with great numbers on backtests, simply because winners usually not shortable on day when signal is issued and of course losers are all yours. with almost 80% of winning rate on backtest, i end up barely making 50/50. looks like OP doing much better.
 
nothing wrong with your idea as long as you can implement a strick risk management control
we do it all the time here.
cramers initial calls, stock reports and as you have mentioned

it will be greed that causes it not to work
ie if the stock ran 2dollars a fibo retracement swing trading exit might be 15-20percent versus trying for the 50percent.
the trick here is getting the traders to realize they have to leave money on the table or if it runs to take the quick loss and move on remembering to keep the position small and in liquid stocks
1000-2000 shares usually works for us but we have had times were it has taken us the whole day to exit the trade as a few hundred shares moved the stock. this was as a result of being over zealous on a cramer pump and not taking the time to check the daily volume.
good luck

w
 
Quote from koonsdawg:

How do you test it before trading it? I have actaully been trading like this and have made over 38% gain in four months. And I tought a friend of mine how to do it and he has made 50% gain in four months. This is all real money not paper tradinig. But I am interested in learning on how to test my strategies.
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Sound like BS to me.

You only gave one example (CPSL) and anyone can look at a chart and come up with a trend. I would think that's hard to short a stock that doubles ($5.00 to $10.00) in one day.
 
A friend of mine came to me and told me very excitedly he bough ESCL at close on 12/19/2006 because the price almost doubled that day from 4.48 to 8.60 on heavy volume, and then he sold it the next day above 12.50.
 
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