Please help -- shorting techniques

G

greenleaf

I am not nearly as good at going short as long. I did something today and I'm not sure if it was a really dumb move.

I took smaller than usual short positions in five different stocks rather than taking my normal sized position in, say two different ones. I figure this spreads my exposure out.

Bad technique? Good idea?

Thanks.
 
How could it hurt? It's probably the trading equivalent to 'crawling before you walk' or 'dipping a toe in the water'. You can jump in full force later when you're more acclimated.
 
Folks,

I would like to expand on this shorting topic. I'm new to trading and will start Prop trading soon. My question is on an obvious day like today when shorting would be the prelavent way to go, how are experienced traders doing with it.

Are you getting into shorts the way you would like, are you able to cover when you feel it best to do so, how are your profits. I understand the trend is your friend, but does it take much more to make good trades happen when you take the path most are going. I assume this applies to an up day or it probably would be easier.

I can imagine the obvious but I would like to hear it from experienced traders down in the trenches how it is in reality. I enjoy the response here on ET.

Thanks
 
I have a utility I found on the net.
It will flip the Y axis on any screen.
In other words, it turns your chart upside down.
This way, you can look at a potential short as a potential long.
It's called "upsidedown.exe".
Email me if you need a copy.
Dave
 
Btw, I think taking positions in multiple stocks is a better way to go. That way, even if you get stopped out on half your trades, the other half can still make you some $. I only play the open, and it's a bit difficult to enter too many positions. Still working on that. I'd like to be in 5-8 positions within the first 10 min. of market open.

-FastTrader
 
Quote from greenleaf:

I am not nearly as good at going short as long. I did something today and I'm not sure if it was a really dumb move.

I took smaller than usual short positions in five different stocks rather than taking my normal sized position in, say two different ones. I figure this spreads my exposure out.

Bad technique? Good idea?

Thanks.
More...

You definitely spread out your "company exposure" by doing this, but a couple of things that I might suggest you consider that you may already have thought about are.....

1) Sector exposure (if they are all in the same industry...the diversification (for the most part) is futile. Consider using a market/sector proxy.

2) Beta of the various positions. With my money, I keep track of what my beta weighted positions look like. For example if you were going to $5K in two stocks but decided to $1K in 5. This could have a dramatic impact on the result based on what the beta of the other 3 stocks are.

Somethin to think about.

-D
 
Do you realize that beta is taken from a 5-yr regression based solely on daily closes? My experience says that for daytrading, beta is pretty much useless.

That is all.


BigMike
 
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