Is it stupid to short the top % gainers of the day?
- Thread starter koonsdawg
- Start date
A 12 step program:
1. Get a post-it pad.
2. Get a 36" x 48" cork board.
3. Get a red ink pen.
4. Get a Black ink pen.
5. With red ink, write "no" on 20 post-its.
6. With Black ink, write "yes" on 20 post its.
7. Adhere post its in random order on the cork board keeping the distance to the next post-it about the same. Make sure all 40 are evenly, but randomly spaced on the board. then hang the board up on a wall.
8. Using masking tape, mark a line on the floor that is approx 15' from the board.
9. Acquire darts.
10. For each trading day, standing behind the masking tape line, face the board and throw one and only one dart at the board with the post-its attached to it.
11. make note of the post it that the dart hits. If the dart fails to hit a post-it, repeat step 10 until one does.
12. As per post-it, trade accordingly for the following day.
1. Get a post-it pad.
2. Get a 36" x 48" cork board.
3. Get a red ink pen.
4. Get a Black ink pen.
5. With red ink, write "no" on 20 post-its.
6. With Black ink, write "yes" on 20 post its.
7. Adhere post its in random order on the cork board keeping the distance to the next post-it about the same. Make sure all 40 are evenly, but randomly spaced on the board. then hang the board up on a wall.
8. Using masking tape, mark a line on the floor that is approx 15' from the board.
9. Acquire darts.
10. For each trading day, standing behind the masking tape line, face the board and throw one and only one dart at the board with the post-its attached to it.
11. make note of the post it that the dart hits. If the dart fails to hit a post-it, repeat step 10 until one does.
12. As per post-it, trade accordingly for the following day.
You make some very valid points. I have found that by trading this way you have to be very strict on you risk management. And your right volume is very important as well. I have shorted a stock not realizing it didn't have much volume. And when it came time to fill my order it took awhile. Which made the price obviously different. So I have a set amount of volume that eahc stock has to have before I will short it now.
And you all are right.. It is sometimes hard to be able to short a stock when you want. Sometimes they are not available. I keep track of all of my trades in an excel spreadsheat with the profit and loss. And at first I was loosing about 60% of my trades, but over time I was doing a lot better.
Oh and by the way CPSL was just an example... Strart watching for yourself and you will notice the same trends happening day after day.
I actually found this way of trading by mistake. I was trading on some virtual software for school and kept buying the stocks that were on the top ten % for the day. Well I noticed that I was loosing in just about every trade. So I reversed it and started selling short. Low and behold it worked. Since then, which was three years ago I have refined the strategy a little.
Anyways thanks for the replies. I just wanted to see if anyone else was trading like this. If you are, do you have any tips on what to watch for. PM me if you are interested in exchanging ideas. The way I trade is not that complicated, anyone could do it.
And you all are right.. It is sometimes hard to be able to short a stock when you want. Sometimes they are not available. I keep track of all of my trades in an excel spreadsheat with the profit and loss. And at first I was loosing about 60% of my trades, but over time I was doing a lot better.
Oh and by the way CPSL was just an example... Strart watching for yourself and you will notice the same trends happening day after day.
I actually found this way of trading by mistake. I was trading on some virtual software for school and kept buying the stocks that were on the top ten % for the day. Well I noticed that I was loosing in just about every trade. So I reversed it and started selling short. Low and behold it worked. Since then, which was three years ago I have refined the strategy a little.
Anyways thanks for the replies. I just wanted to see if anyone else was trading like this. If you are, do you have any tips on what to watch for. PM me if you are interested in exchanging ideas. The way I trade is not that complicated, anyone could do it.
The problem with your stragegy is that stocks like cpsl are usually short squeezes, so they keep going up until the shorts are squeezed out. As soon as you think it's ready to pull back, you enter your short, then it keeps going. These things can go for a long time so you have to keep your stops tight or you can get your ass handed to you. Especially in a bull market.
They eventually pull back, but it is a high risk strategy to make this your main source of bread and butter. There are higher probability trades out there.
They eventually pull back, but it is a high risk strategy to make this your main source of bread and butter. There are higher probability trades out there.
I didn't trade CPSL. That was just an example that came off the top of my head. Don't look to far into things. And your right, I have shorted a few stocks that shot up again on the second day. That does happen. However I do some fast research on a stock before I enter a short. And can usually get a feeling for it before I enter.
If you are selective in which ones to short, yes it can be a profitable system. But I would stick my neck out to say if you backtested shorting every top gainer indiscriminately, the results would be a lot less impressive than what you are achieving now. And with the common problem of not having availablity from your broker to short, you will have problems with execution of this system.
Have you considered the reverse scenario, the dead cat bounce? That is, stocks rebound after big drops.
I have backtested such a system and the results are eye poping. I have started a blog to chronicle the bounce plays at slotmarket.blogspot.com
Why don't you start a blog to track your trades? It'll be really interesting to see both of our systems in action.
Have you considered the reverse scenario, the dead cat bounce? That is, stocks rebound after big drops.
I have backtested such a system and the results are eye poping. I have started a blog to chronicle the bounce plays at slotmarket.blogspot.com
Why don't you start a blog to track your trades? It'll be really interesting to see both of our systems in action.
a friend blipped me this link with no comment, and i said "nah, i'm not going to post there". but i changed my mind.
anyhow...i've been shorting top % gainers - most times intraday, sometimes a couple day short. the initial impetus had been going around in my head for more than 10 years, for when i hadn't traded for too many years, i'd get into some stocks near tops and watch a bunch of them fade. my winners saved me, and made me money, but i've used it for a while.
i have a *ton* of rules i adhere to, some based on fundamentals, some on technicals, for NOT shorting top % gainers. i don't have them written down, but i do a bunch of checking on each stock before i enter it.
if something feels wrong after i'm in a position, where the stock doesn't act as it should, i'll get out. sometimes, i'll be wrong, and it will collapse more. c'est la vie.
it's definitely not for everyone, and because i limit size traded, it's not something that can be expanded out for position. i don't use it as my exclusive trading method - i have a couple other things i do as well. and i'd be more hesitant about doing it in futures or commodities.
oh, CPSL is shortable again at IB. i doubt i'll be shorting it today.
anyhow...i've been shorting top % gainers - most times intraday, sometimes a couple day short. the initial impetus had been going around in my head for more than 10 years, for when i hadn't traded for too many years, i'd get into some stocks near tops and watch a bunch of them fade. my winners saved me, and made me money, but i've used it for a while.
i have a *ton* of rules i adhere to, some based on fundamentals, some on technicals, for NOT shorting top % gainers. i don't have them written down, but i do a bunch of checking on each stock before i enter it.
if something feels wrong after i'm in a position, where the stock doesn't act as it should, i'll get out. sometimes, i'll be wrong, and it will collapse more. c'est la vie.
it's definitely not for everyone, and because i limit size traded, it's not something that can be expanded out for position. i don't use it as my exclusive trading method - i have a couple other things i do as well. and i'd be more hesitant about doing it in futures or commodities.
oh, CPSL is shortable again at IB. i doubt i'll be shorting it today.