Shorting Today's GapUp - The "Correct Way"

[shortie]

I presume many shorted as the market gapped up this morning. Obviously things did not work out for those holding on to their shorts too long.
My question is what was the "correct" way of playing the short side this morning. There are probably many ways but what did you guys use? What works in general?

Price stop-loss? Stop-and-reverse? Exit if the trade was not profitable after first few minutes (timed stop-loss)? Gut feeling stop-loss?

 

[amedhussaini]

never remain in a gap up short position if price drifts above yesterday's high of day.

 

[HedgefundTrader2]

Quote from shortie:

I presume many shorted as the market gapped up this morning. Obviously things did not work out for those holding on to their shorts too long.
My question is what was the "correct" way of playing the short side this morning. There are probably many ways but what did you guys use? What works in general?

Price stop-loss? Stop-and-reverse? Exit if the trade was not profitable after first few minutes (timed stop-loss)? Gut feeling stop-loss?

DONOT try to short when Feds are about to cut rates.

With DJIA above its 50 day moving average today, I wouldn't certainly attempt to engage in this futile exercise.

 

[shortie]

Quote from amedhussaini:

never remain in a gap up short position if price drifts above yesterday's high of day.

according to your tip, most stocks should not have beed shorted in the first place since today gap-up was above their prior day high, is this correct?

 

[amedhussaini]

i dont trade gaps anymore (they dont exist on 24 hour charts with volume/tick charts), but when i did, i was always cautious about shorting a gapup that remained aboved yesterday's range.

 

[1nibbler]

Quote from HedgefundTrader2:

DONOT try to short when Feds are about to cut rates.

With DJIA above its 50 day moving average today, I wouldn't certainly attempt to engage in this futile exercise.

well, I guess the law of large numbers has caught up with me. I actually agree with good ol' hedgie here. :eek:

 

[HolyGrail]

Quote from HedgefundTrader2:

DONOT try to short when Feds are about to cut rates.

With DJIA above its 50 day moving average today, I wouldn't certainly attempt to engage in this futile exercise.

Damn how many threads are you going to mention the 50 day moving average? I guess you have never seen something go above the average and then drop below it shortly thereafter.

 

[shortie]

Quote from amedhussaini:

i dont trade gaps anymore (they dont exist on 24 hour charts with volume/tick charts), but when i did, i was always cautious about shorting a gapup that remained aboved yesterday's range.

oh, I see. it is ok to short a stock that has gapped up above yesterday's high as long as the position is exited if the stock STAYS above yesterday's high for some period of time (timed stop). At first, I thought you implied that one should not short if it gaps above the previous high.

 

[mgabriel01]

Quote from shortie:

oh, I see. it is ok to short a stock that has gapped up above yesterday's high as long as the position is exited if the stock STAYS above yesterday's high for some period of time (timed stop). At first, I thought you implied that one should not short if it gaps above the previous high.

Fading gaps by simply entering at the open worked 80% of the time in January

It worked less than 15% of the time in Feb

I hope it comes back - it was easy money in January

 

[mgabriel01]

Quote from HolyGrail:

Damn how many threads are you going to mention the 50 day moving average? I guess you have never seen something go above the average and then drop below it shortly thereafter.

Theres a big-ass gap from 2/29 that never filled
it came close today

all kinds of gaps did not fill the same day in feb and early march