Short Only Traders

[Atlantic]

this one is from an article linda bradford raschke wrote:

" ...
Also note which types of trades seem to work out best for you. I know one market professional who trades best by waiting for a strong afternoon thrust. He then enters on the first pullback in the direction of the thrust. He claims he loses on balance getting "chopped up" in the morning's cross-currents. However, another good friend can trade only in the morning and only from the short side. He waits for an initial morning surge, places his shorts, and never risks more than 2 points. This professional has consistently made a most enviable living for the past 15 years. The moral of the story is: he knows himself and what style works best for him, and he always has a resting stop loss order in the marketplace.
..."

 

[goldenarm]

Having a long-term directional bias is dangerous in daytrading. Learn to go with the flow of the futures, don't trade against it. When you trade short, is it for very short term? Also, how big are your stops? Stocks like CYMI and KLAC can take off and screw you!

 

[shortologist]

Golden what you say is true. Most shorty's I know are trying to short a shooting star, and so don't use stops like "normal" traders. They take a position at a pause, then add more at the next pause, and then add more at the next pause, and try to make in all back in a crash. If there is no fallback, they are truly screwed, or if they have used all their buying power before it finally peaks they are screwed. In other words if they move to fast they are screwed and if they move to slow they miss it.

This breaks every rule in the traders handbook, and is NOT recommended for balanced individuals. There are all kinds of extraneous risks. Maybe a stock is shooting for a good reason and you just don't know it. Maybe a stock is shooting for no good reason, but everyone jumps on the bandwagon and you find yourself in short squeeze, inventing all kinds of new curse words.

So, I'm not saying this is a good way to trade, it isn't. It does work for me, but I did pay a substancial tuition before I starting trading net positive over the long term. As someone said to me in a PM, shortys are wacko.

 

[inandlong]

I can't help but question the idea that a person needs to trade with the trend of the futures. If a stock is trending down and signals a short sell, then short it. If there is not a short sell signal, then don't short it.

Many traders think that it is necessary to trade with the major trend. It is not. That's where sector trading comes from. There are longs and shorts each day, regardless of the trend. The market is trending up, but a sector is getting rocked and you want to short the stocks in that sector, why not.

This idea of shorting a shooting star is similar in metaphorical terms to catching a falling knife. Why do either? When I was a local in the spoo pit in the late 80's, I knew a guy who lost 2 million because he just knew that the market had to come down. He was always trying to get short. Ultimately, he busted out, lost his house and wife, all before Oct 1987.

Not too different is the retail public today who own MSFT at 100 and CSCO at 80 and on and on, and they are holding on waiting for them to come back.

There is no one way to trade. But there are cardinal rules of trading. Two of the most important are cut losses quickly and do not average up, in the case of a short. If the trade is wrong it is wrong. Get out. Quickly.

Everyone loves "the trend is your friend." It is a good one. Not every stock is trending with the futures or the SP500 or the OEX or NDQ. Believe it or not, there are stocks trending up and there are stocks trending down and there are stocks consolidating; and all are occuring in the same market.

You short, it works, stay with it. Warren Buffett doesn't short, is he any more of a freak than you are? Somehow, he has managed to do okay trading just one side of the market.