Professional Day Trading Short Sellers

[FreeGoldRush]

The only problem with short selling is the risk management issue. Because of the theoretical possibility of unlimited price increase that exists, the risk for potentially unlimited loss with short selling is also higher thus the need for prudent risk management for short selling is also higher. That's all.

This is correct and it is the area where there is a lot of naive thinking. People frequently claim that 1 in 1,000 events are infrequent enough they can ignore them, yet they can't tell you the probability of blowing their account to zero. They absolutely don't know and don't care. They think putting in a stop loss order with their broker will protect them.

For me I'm fine with taking short positions or trading options. But I do far more homework and calculating than all these guys on YouTube who are essentially promoting gambling.

 

[FreeGoldRush]

Burry. Eichhorn. Guys I respected but have prove too rigid in the end.

This doesn't mean they are too rigid. They just aren't quantitative traders. They are fundamental traders. I'm a quantitative trader. You are too apparently.

And both of them have demonstrated an enormous lack of ability to do proper risk management. You have to wonder why they couldn't hire a geek to figure that part out for them if they could not or would not.

 

[FreeGoldRush]

Long halts are generally paradise for short positions due to SEC investigation and almost always ends up lower. There is no need to panic if your on the short side.

Agree. IMO this is not your biggest concern as a short seller. But all these things add up to additional volatility. The goal of any trading strategy is to maximize returns and minimize the standard deviation of those returns. Volatility in your own returns can blow an account to zero even if your trades were always putting the odds in your favor.

 

[JSOP]

I wouldn't say it's superior but there is a difference & why many traders prefer the short selling route over low floats due to the fact it's very difficult or at times impossible for retail to catch the bottom on these runners.

With shorting you have a lot more time finding tops vs the bottom that happens in nanoseconds.

Overall, I believe I was def more consistent when shorting vs long but it's just not my cup of tea.

I don't like the idea of being unable to make more than 100% on a trade.

That is why I switched to options. More time for prep and the % gain is unlimited.

True that options do give you higher profit potential due to the positions being leveraged but long puts which is the equivalent of shorting selling the underlying still has its maximum profit capped at (strike - 0) X position size because the price of the underlying again cannot go negative. So if your disliking of shorting is due to it not allowing you to make more than 100% on a trade, you would still have this same problem in options as the % gain is still limited. Just so you are aware.

 

[JSOP]

This is correct and it is the area where there is a lot of naive thinking. People frequently claim that 1 in 1,000 events are infrequent enough they can ignore them, yet they can't tell you the probability of blowing their account to zero. They absolutely don't know and don't care. They think putting in a stop loss order with their broker will protect them.

For me I'm fine with taking short positions or trading options. But I do far more homework and calculating than all these guys on YouTube who are essentially promoting gambling.

Putting in a stop-loss order would still offer some protection but it will depend on the quality of the stop-loss order and how it's executed.

 

[comagnum]

Been shorting equities & going long side since the late 90's. I learned the hard way to short only the larger cap stocks which can provide excellent profits with much lower risk & trading costs than the low price/low float stocks.

I personally know two traders that short stocks & have done well over the years. They are not messing around with low priced/ low float stocks. They both make the bulk of their annual profits from a few big winners they hold from days to months.

 

[MoreLeverage]

Long halts are generally paradise for short positions due to SEC investigation and almost always ends up lower. There is no need to panic if your on the short side.

KBIO was halted after the ceo was arrested. I got charged 150% interest on the prior close $20 price for over a month. Even when it fell to a few bucks when it resumed, it was still a big loss.

 

[SunTrader]

As is typical of so many trading threads hardly a mention of ..... timing. All price based.

 

[FreeGoldRush]

I learned the hard way to short only the larger cap stocks which can provide excellent profits with much lower risk & trading costs than the low price/low float stocks.

The risks diminish with larger cap stocks. It's when you get under $10 billion in market cap, and especially $1 billion that you find significantly unpleasant surprises.

 

[lwlee]

You assume too much again. The title of this thread is "Professional". To not considered the downside risk is to be like that kid who held Shrekli's stock for multiple day as it blew him out.
Bagholder. Another colorful term that I forgot to include. Inexperienced trader who hold and hope.

RenTech is who INSPIRED the new generation. What RenTech created was as close to the golden goose as you will find. But they are so big that they play at a different level. Most low float small cap have a limited possible gain if you are a big player. Some of the serious daytraders shorting these stocks will hold their position but they stand the risk of being the only bid in the market.

Surely you are aware that quantitative trading strategies have been used since the 1980s. Ren Tech?? Millennials and Gen Z are hardly the first to try and use math to trade markets.

At least you and I could probably agree that math is a powerful tool when trading. We would disagree on risk management. lol.