6/25/2007

How to find shorts



If all the circumstances are favorable, shorting stock works sometimes in market . Per trade profits on short side tend to be significantly smaller than on long side trades. However having a variety of shorting techniques in your repertoire of trading methods is not a bad idea for active traders.

While there is no shortage of bearish opinion, there are few methodical ways to find short. You still have to find a stock to short if you read for 3 years in row that American economy is going to dogs or market is going to go down by 50%.

So here is a simple system that may make even the perma bears profitable on short side in most market circumstances. As usual it is for the users of Telechart.

  1. Set up a Easyscan with following conditions:
  2. Watchlist= All stocks
  3. Price growth rate 1 year= rank 75 to 100
  4. Price percent change 26- weeks= rank 1 to 25
  5. Volume 1 day= value 1000 to max
  6. This will give you a list of candidates which offer good short opportunity.
  7. Sort this list by price and take top 30 stocks and on them use following scan to time entry.
  8. ( 100 * (C - C1) / C1) <= ( - 4) AND V >= 1000 AND V > V1
  9. Stop at high of entry day.
  10. Move stop to protect 10% profit, after that keep moving stop every 2% plus move to protect profits. Profits on short side are ephemeral, a counter trend rally can wipe them out in few days so taking smaller profits and playing this more as swing system will gives better results. Because you are looking at only 30 stocks, you can anticipate short entries.
The basic logic behind this is to short a stock which was formerly a price leader and which had been lagging market in last six month. Stocks on short side go from high price to low price, hence take top 30 ranked by price.

When I find suitable name I will rename this and add to the sidebar.

Later: More shorting techniques ........




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