Is shorting a dead end street?
- Thread starter jr07
- Start date
Just because it's a bear market rally, doesn't mean you should be shorting it all the way up. In fact, the most violent and largest percentage rallies of all time have occurred in bear markets, precisely because so many people are going short and getting squeezed. Bear markets have the largest moves both up AND down.
âHe who sells what isnât hisân, must buy it back or go to prisonâ
"A classic little saying about short selling on Wall Street is: âHe who sells what isnât hisân, must buy it back or go to prison.â The origin of the saying is unknown, but by 1898 it was attributed to financier Daniel Drew (1797-1879).
An older English couplet (dating from the 1830s) and supposedly written by a 14-year-old criminal in chalk on a prison wall is: âHim as prigs wot isnât hisân, Ven heâs cotchâd, wil go to prisân.â
shorting stocks is a losing game. The appeal is being a hero when you catch a big top but it really is a losing game.
Now some people short succesfully and consistently because they hold for short period of time when the market goes down and know when to enter. But for multi day hold it's a losing game, hedge funds are privy to "inside" info so they are able to do it (although they take some big losses as well) , but consider this, many shorts in 2008 lost money or were shaken out of their position on the bailout. Those who didn't took enormous risks being short from much higher levels or riding out the bailout spike . Shorting during the crash was extremely risky, any minute the market could start rallying at a rate of 10 point per minute. And when all the stars were aligned for a perfect short in August, you lost money or drove yourself crazy.
Now some people short succesfully and consistently because they hold for short period of time when the market goes down and know when to enter. But for multi day hold it's a losing game, hedge funds are privy to "inside" info so they are able to do it (although they take some big losses as well) , but consider this, many shorts in 2008 lost money or were shaken out of their position on the bailout. Those who didn't took enormous risks being short from much higher levels or riding out the bailout spike . Shorting during the crash was extremely risky, any minute the market could start rallying at a rate of 10 point per minute. And when all the stars were aligned for a perfect short in August, you lost money or drove yourself crazy.
Ive been short on many occasions since July, on and off, not a single trade since July (Ive learned at least the first rule by now, cut losses short)
So Ive been wrong many many times since July and cut the losses short but its beginning to add up
I guess from what I read, I take away 2 things
1. Timeframes. This is a very important rule in trading, kind of like look boith ways before crossing the street. And the longest timeframe, be it daily or weekly on any index shows an uptrend, be it via trendlines or using simple EMA xovers, like a 40 and an 80.
2. Top/Bottom Calling. This is the one mistake I find myself making the most on a recurring basis, and one that I have as a goal for 2009 to not make any more, "The market cant go up more from here" I find myself saying a lot.
As for why I have been short since July, many reasons really. A TA based system I follow has been short during July and August... I also read xtrends and zerohedge, they keep calling for armageddon since July also... Maybe I need to stop reading so much of people's opinions and just look at the tape
J
So Ive been wrong many many times since July and cut the losses short but its beginning to add up
I guess from what I read, I take away 2 things
1. Timeframes. This is a very important rule in trading, kind of like look boith ways before crossing the street. And the longest timeframe, be it daily or weekly on any index shows an uptrend, be it via trendlines or using simple EMA xovers, like a 40 and an 80.
2. Top/Bottom Calling. This is the one mistake I find myself making the most on a recurring basis, and one that I have as a goal for 2009 to not make any more, "The market cant go up more from here" I find myself saying a lot.
As for why I have been short since July, many reasons really. A TA based system I follow has been short during July and August... I also read xtrends and zerohedge, they keep calling for armageddon since July also... Maybe I need to stop reading so much of people's opinions and just look at the tape
J
A lot of people have been reading TA based systems and thinking it's the time to go short. Being successful in the market is not about reading TA, it's about understanding the prevailing conditions and trading appropriately. If you understood that, you would know that prevailing conditions indicate an artificially manipulated market far greater than normal, and that means that classic TA on the daily time frame won't work. The spike in July off of that head and shoulders pattern should have taught you that. Good traders adapt to changing conditions all the time, and always understand what the game is.
For example, when some people were saying "this is it" last week when the market was at 1000 and drifting lower, I wrote on this site that everyone should be careful for exactly the reasons mentioned above. Normally a big down day like that on high volume is a bad sign... but not in today's market. In today's market, that means nothing because they can turn on the taps any time they want and send it rocketing higher.... and that's exactly what they did for around 40 points this week. You have to always adapt to new conditions and know how to read price action. The market is a poker game, and the goal is to outguess your opponents.... sometimes TA helps you do that, and sometimes (like during this rally) it doesn't help so much.
Correct "trading in the zone"
Everyone has their own strategy that they are comfortable with so its hard to identify a "right" way.
You need to identify which trading technique your most comfortable with. Do you trend trade, countertrend trade, scalp, swing trade?
Each technique uses a different strategy.
When I use to day trade, I found counter trend trading more comfortable for me. So when AAPL fell from 200 down to 120, I made all my money on the upswings of the day (using EMAs) because it gave me time to plan my next attack while it trended down. The problem with this is that you have to place big bets to make any money.
Find a timeframe and technique your comfortable with and you'll do a lot better in your trading.
jr07
Ive been squeezed to death since early July, since then I have been trying to catch a decent run on the short side, and have been always wrong
This week and more so today, It did seem like the time finally might come. And yet everyday at 3:30pm the market is run up
=============================================
What are you trying to short? Fri was a good day to short. MON dropped another 1.27.
What are your goals? How many points are you looking for? MON dropped for the first hour and a half. POT dropped over 2.00 in the first couple of hours.
What signal or setup are you looking for to short? Why are you holding for the whole day if you know, or think you know it's going to spike up around 3:30?
Don
Ive been squeezed to death since early July, since then I have been trying to catch a decent run on the short side, and have been always wrong
This week and more so today, It did seem like the time finally might come. And yet everyday at 3:30pm the market is run up
=============================================
What are you trying to short? Fri was a good day to short. MON dropped another 1.27.
What are your goals? How many points are you looking for? MON dropped for the first hour and a half. POT dropped over 2.00 in the first couple of hours.
What signal or setup are you looking for to short? Why are you holding for the whole day if you know, or think you know it's going to spike up around 3:30?
Don