Profiting from Downward movement.

E

ehsmama

Hello,
Please help me find direction on how to develop a set of rules that can be used to develop an automated system that goes short only profitably.

I can't get over this idea that one can automate a shorting strategy for stocks. Anyone help would be greatly appreciated.
I have good systems that go long only. But they just sit out a Bear market. I think there has to be a way to to short mechnically....

Please do help,
Thanks,
Rajiv
 
Quote from Bearbelly:

I think the "only profitably" qualification is going to limit the possibilities considerably.
More...

Hi Bearbelly,
I did not mean short "only profitably". I meant "Short Only" system that is profitable.
Thanks,
Rajiv
 
Following is the output of a moving average crossover system. Input data is about 10 years of Standard And Poors Index Tracking Stock symbol SPY daily price data.

Trades are long term. I do not find profitable results when testing shorter term trades using this system. I did not test time constants less than 10 days. Use of shorter time constants might test profitably.

I do not remember testing this program thoroughly. I show this only as an example of a moving average crossover system that trades short positions only.

Generally speaking I find much better simulation results trading stocks using long position trades than short position trades.

===

FastTimeConstant is 40
SlowTimeConstant is 100
ATR_Multiplier set to 10.00
Name of data file is SPYdaily.txt
Long or short is: short positions only
Heat is 10000
Initial capital is 100000
Slippage and commission per transaction is 100.00

====================================================================

12-Jul-94 OHLC:[ 37.05 37.05 37.05 37.05 ] short sale at 37.12 size 3167
Dollar Position Cost is 117559.04
22-Jul-94 OHLC:[ 37.49 37.49 37.49 37.49 ] cover 37.55
Position Net Gain Or Loss is -1362
Subtotal profit $ -1362

20-Nov-00 OHLC:[ 123.26 123.26 123.26 123.26 ] short sale at 123.89 size 514
Dollar Position Cost is 63679.46
9-Jun-03 OHLC:[ 92.81 92.81 92.81 92.81 ] cover 93.75
Position Net Gain Or Loss is 15492
Subtotal profit $ 14130

Number of trades 2
Total profit $ 14130
Profit after subtracting $ 100 commission & slippage per transaction: $ 13730
InformationRatio is 0.84
Heat is $ 10000 per trade
Drawdown is 0.0136
Initial capital is $ 100000
Slippage and commission per transaction is $ 100.00
Uses 20 period average true range to calculate position size
Trades only short positions.
 
Sure, there's a long bias on equities.

But as long as Buy/Hold traders and Mutual Funds have drawdowns, there are opportunity for speculators.
 
I stopped my short mechnical trading strategies simply because I couldn't get a fill sometimes on the shorts because my broker couldn't borrow the shares.

So, the backtesting resulted in great performance, but when I implemented it, I missed out on a number of profitable trades due to real world conditions.

Trading long is much easier IMO.

-Mike
 
Quote from mvalley:

I stopped my short mechnical trading strategies simply because I couldn't get a fill sometimes on the shorts because my broker couldn't borrow the shares.

So, the backtesting resulted in great performance, but when I implemented it, I missed out on a number of profitable trades due to real world conditions.

Trading long is much easier IMO.

-Mike
More...

Get a better broker...
 
You must log in or register to reply here.
Back
Top