And how are you this blustery Autumn day?
I thought I'd take a moment to complete my thoughts on shorting - I am sometimes reluctant to say too much since everyone seems to have more experience and intuition than I [you seem to be pretty high on the intuition scale].
The method I use is a combination of procedures outlined by Alexander Elder and Justin Mamis [When to Sell in the 90's]
step 1: place the order to short with a stop one tick [1/16] below the lowest low of yesterday or the previopus day
step 2: use a limit to control the allowable range of filling your order, normally I'll use 1/4 below the stop - when I give it more latitude, I get worse fills.
Step 1 ensures that your stock actually goes down; if instead it goes up but you still think it is a short, then you can follow it for a few days, Raising your stop price according to the new lows. Note, once the stock hits your stop, then it must rally a bit for the short to take effect, you want to be careful the rally does not get out of hand <G>
step 2 ensures you don't get terrible fills, bad fills work like this:
[maybe someone with more experience can refine this]
say you enter a market order to short, and at the same time the stock begins a sustained decline. Naturally you won't get a fill because there won't be an uptick. Following your rubber band rule, eventually the stock reaches the point where the selling is exhausted [at least temporarily] and the stock is bid up. At the first uptick your market short gets filled, and viola! a terrible fill, possibly at the low of the day [and yes, I have been there]
note that this is not necessarily manipulation, but just ordinary market flow.
So the limit is very important, and this is something Elder does NOT menetion, perhaps because he deals mostly with futures and there is no uptick rule
Another thing to avoid is shorting at the open - I know this, I still do it, and I still get creamed, which is the source of my difficulties in my positions in SPY. Order imbalance at the open will almost always give you a bad fill. And yes, you may well miss some shorts following thses rules, but that is a lot better than having terrible fills.
The best time to short is after a stock has fallen enough to determine it is in a down trend [say on a weekly basis] and has then rallied back up a bit - you should then short when it starts to fall again [ie when it trades below the previous days lows]
Elder has very good dsicussions of how to use oscillators to do this, and it works - if only he was as good getting me out <G>
Well anyway, if you have read Elder than I apologize for the redunancy
Bob |
