On the short side, FIBR was a real star, falling from my 15 5/8 entry to 13 3/8 at the close. The jig is up and death spiral discount convertible financing will doom yet another crappy company.
CCSI, however, is going up in the current wave of exuberance. I shorted at 5 (small position) and have a stop in at 9, which would break the last minor high. CCSI shares will be hard to get again for shorting, but I don't feel like tying up margin by boxing the position. If it's a loss, it's a loss and I move on.
Which brings me to a sad story today - I had a PM from a regular SI poster who incurred substantial losses shorting high flying momentum stocks. The loss was enough to impact his family situation.
I want to repeat for everyone that shorting can be a dangerous business. If you stay in a losing position it can go against you more than 100%, unlike a long position which can only go to zero. If you are going to play the short side, use the same strategy of stops and profit-taking that you would on the long side. I learned my lesson with PVN last year - take a small loss and move on.
The second rule is that no single position (long or short) should ever be large enough to have a serious impact on your financial security. Keep stops on your largest positions and don't let anything get too big. Some people say no position should be more than 10% of your portfolio; with smaller portfolios I think that should be 20%. That's what I have in BRKB and WCOM, now 16% and 19% of my portfolio respectively. Both have trailing stops within 10% of the current share price.
In late 1997 I poured much of the year's gains into BNGOW and watched it drift away to nothing. Finished flat in a year where the averages were zooming. Apart from that dumb mistake, I remember my wife saying to me "Just because you are down, don't start taking big chances." That is some of the best advice I ever had about trading. The market is open year round; you will always have another chance to recoup losses or increase your profits. In the last month my portfolio has gone up more than 30%. Life now certainly looks brighter than it did on December 1, but it happened because I stuck to my philosophy, not because I abandoned it.
Good trading everyone. |
