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

Interesting you say that Ken. I have looked at trading this scenario as well. However I found that I was not as succesfull in my trades. I will be reading your blog to get more insite. I think it's a very interesting concept of trading.

Quote from KenL:

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.
More...
 
Thanks for responding. I am glad to see that I am not the only crazy one on here. One of the most imortant things you said is you have to go with how you feel a lot of the times. I don't enter every top ten % gainers, I usually will try to keep it between 1-3 trades a day. And your right it's not for everyone, I have had some very stressful days watching charts.

Happy Trading..

Quote from gaj:

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.
More...
 
My advice is to look at a chart with moving averages first before you enter any trade to see if it makes sense. Establish resistance points and ceilings...

However, the trade being described is unpredictable and highly volatile. You shouldnt do this until you have more experience.

I would never attempt this trade myself. I believe I am good with a chart, but this is too risky.
 
depends on many things.

I would say OVERALL it is a lousy strategy in a bull market.

in a bull you are better off following the biggest losers for a bounce on resistence after an exhaustion rally to the downside.

I would say what you are doing right now would be a 1 way trip to brokesville.
 
Quote from KenL:

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.
More...

The guy that started this thread (link below) now runs a hedge fund. He stared buying GROW a few years ago. I think he is up about $14 million. Anyway this thread discusses a similar strategy.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=881&highlight=great+AND+new+AND+pattern
 
One of my strategies is similar to this. It started by buying the gainers and selling the losers, but after a while I began to recognize which stocks had the potential to continue their morning direction, and which would fail. If you continue to trade this you should be able to recognize this after a while also, then you can take both directions and be more market neutral.

For example today my favorite continuation stock would be MWRK, and the best gap reversal is MOT. Position management is very important, you should lose a little when you are wrong and make a lot when right.

Re: the last post about P2. I traded that with him and helped develop that strategy. It was mostly just a long bias, and based on volume reversals...so not really related to this thread.
 
I have been looking into a similar strategy for some time, but for stocks that are down on big volume. There will usually be a pullback starting around 10:00 - 10:30. I only consider stocks that are priced above $20, and with a potential pullback of at least $0.50. I will buy 500 or 1000 shares and look for a $0.5 to $1.0 pullback, with a $0.5 stop.
Most of the time you will find these stocks with a simple dollar or percentage drop scan (I use TradeStation), but some days you will not find any.
I found this easier than to chase gainers. It might have something to do with the mini bull market that we had lately, or is just that when stocks drop they will drop faster than when they go up. Not to mention that you only go long, so you don't have to worry about the stock beeing available for shorting.

For example, today (I didn't trade this today):
HSL
GPN
 
Dustin that is a good idea to go both ways. I will start watching the loosers as well and see if I can get comfortable with them. I have noticed that if I short three stocks a day I can usually make money on two out of the three trades.

Quote from Dustin:

One of my strategies is similar to this. It started by buying the gainers and selling the losers, but after a while I began to recognize which stocks had the potential to continue their morning direction, and which would fail. If you continue to trade this you should be able to recognize this after a while also, then you can take both directions and be more market neutral.

For example today my favorite continuation stock would be MWRK, and the best gap reversal is MOT. Position management is very important, you should lose a little when you are wrong and make a lot when right.

Re: the last post about P2. I traded that with him and helped develop that strategy. It was mostly just a long bias, and based on volume reversals...so not really related to this thread.
More...
 
Quote from koonsdawg:

Dustin that is a good idea to go both ways. I will start watching the loosers as well and see if I can get comfortable with them. I have noticed that if I short three stocks a day I can usually make money on two out of the three trades.
More...

2/3 is pretty good. I only have around a 55% success rate but winners far outweigh losers. Usually I will trade 10-15 stocks a day, and 1-3 will be big winners. For example yesterday I caught ABFS, ANGO and WITS.

With this stuff the longer you do it the better you get so keep plugging away.
 
You must log in or register to reply here.
Back
Top