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Sell Short Trading Strategy

 

Short Description
This strategy is close to a negative image of the Basic Trading Strategy. We sell short two stocks from the list of potentially bearish stocks with maximum price rise (in %) at the market opening at day #1 and buy back at the closing at day #3.


More details
In the table you can find a scheme of using Sell-Short Trading Strategy

Before market opening on the day following the analysis check the stocks in the potentially bearish stock list.

Find two stocks with maximum price (in %) rise at the market opening on day #1, i.e., the ratio Ope1/Clo0 should be maximal.

Hold these positions and buy back stocks at the market closing on day #3.

Criteria of selection of potentially bearish stocks are stronger than criteria for potentially bullish stocks. They should be strongly overbought within 16 and 32 day frames. This is why there are some days when the list of bearish stocks is empty. We do not worry much about it. History analysis (1996 - 2002) shows that there were no quarters with negative returns for this strategy even during the powerful bull market in 1996 - 2000. More statistics you can find in our e-book Short-Term Trading Analysis.

The position holding period for the sell-short strategy is shorter than for the basic strategy. It helps to reduce the risk of the strategy.
 

 

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