# Best book on shorting stocks



## yonnie (6 August 2007)

could anybody point me in the right direction?

thanks


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## tasmanian (6 August 2007)

stan weinstein - profiting in a bull and bear market.

i wouldnt like to be holding stocks long atm.i am looking for a bounce and then a further drop for the rest of the year.

some great shorts developing on the market atm.ive already got a few and will top them up when/if they rise abit or top them up if they drop more.

im in a full bear suit now.could be just a correction but its going to get more painful imo if your holding longs.might be a chance to bail on the next rally.

just my opinion could be wrong so we will see what happens.rebound for the xao up near 6200 the down below where we currently are.


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## yonnie (6 August 2007)

thanks tas, will ask the library.

yeah, at the mo I`m bailing out `cos I think it will stay volatile for a while longer than first thought.

only catching stocks down 20+% on the day and sell in the next few days.

good luck


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## jempol (7 August 2007)

May be : How to short stocks(william o'neil)


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## yonnie (7 August 2007)

hi tas and jem,

thank you both for your contribution.

those books you guys recommended, were they any good and did they help you in your trading?

thanks


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## tasmanian (7 August 2007)

gday yonnie,

stan weinsteins book helped me alot especially if you are after a book explaining how too get a good part of a stocks trend either up or down.

its a good book for both going long and short.definetely worth a read.its quite easy to understand and pretty basic but a great place to start imo.id be suprised if it didnt help you in some way.

from what i read in that book ive been finding some good stocks too short atm.i wouldnt be suprised if they turn in too some nice gains.the book helped me make some great gains on the way up hoping it does the same on the way back down.thats if we are headed down but looks that way too me some stocks look very bearish imo.nothing guaranteed so ill just see how it works out.

good luck with it all


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## weird (7 August 2007)

yonnie, 

It is very difficult to find books, let alone good books, on shorting stocks. 

And for a reason, the stock market has an upward bias.


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## tasmanian (7 August 2007)

weird said:


> yonnie,
> 
> It is very difficult to find books, let alone good books, on shorting stocks.
> 
> And for a reason, the stock market has an upward bias.




thats true over the long term but the market would be rising less than 50% of the time.its either up down or alot of sideways.

learning too and shorting is hugely important imo as they say up by the stairs down by the elevators.

shorting stocks is a great way too make money in a bear/downtrending market rather than sitting your cash in the bank or being a long term investor.crazy imo to hold stocks long term when they are clearly in a downtrend sure good stocks will eventually make new highs in the long term but why not profit on the way down as well as the on the way up. you can profit greatly when stocks  are dropping.

i have a cfd account i use only for shorting and a cash account for longs.the cfd providers even pay interest when you are shorting rather than charging you interest so even better.

shorting is simple just do the opposite to when you go long.top up when it breaks through support and the stock is in a clear downtrend.but make sure you have stops etc funny when you buy a stock long it drops when you sell it short  it rises.anyone that says trading is easy is a bloody genius imo.

ramble ramble anyway learn too short stocks last couple of weeksa have been very profitable for me when alot of others are hoping the market rises im happy to see it drop


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## weird (7 August 2007)

Tasmanian,

Backtesting mechanical shorting stategies on the stock market, by reversing the logic behind long entries, and using a broad market filter, such as the index is down, or below an MA, etc, in most cases does not work well at all. As you mentioned, this is perhaps more relevant for longer term strategies.

Mind you, I'm not saying that shorting does not work as a trading strategy, particularly in other types of markets, and short term trading for stocks, or stock indices using leveraged instruments.

What I was eluding at, is that it is not easy, and hence there are not many books suggesting reversing long strategies, on the stock market, when the broad market starts heading south, particularly using similar types of exits.


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## tasmanian (7 August 2007)

weird

wo worries mate i wasnt having a go at you i was just letting weird know thats important too know how too short stocks as well as going long..agree theres not many good books on shorting but i believe weinstiens theory can be very profitable in going either long or short.

ive never backtested the theory and im not sure if you are familiar with it or not but its basically looking for stocks in a long consolidation that break their 30wkma and resistance on a build up of large volume.that is called a stage 1 breakout .

then the  stock moves into a stage 2 uptrend as long as its stays above its 30wkma just ride the trend until it levels out forms a stage 3 then eventually breaks back through its 30wkma into a stage 4 downtrend then if its a good candidate short it.
depends on the overall market/sector etc but ive been following it as one way to trade and has proved pretty succesfull.

not sure if you could backtest this system but if you had the time id be very interested in the results. 

cheers


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## weird (7 August 2007)

Hi Tasmanian, I have read Stan Weinstien's book, so am atleast familar with the terms. 

I have been paper trading (too many side projects at the moment! This is one of many ... time is the enemy) a short and long trade system based on the SMI Wyckoff course, but was more focusing on the short trades for the exercise, and this was before the recent decline.  The system showed enormous promise.

It does use an Index filter, but not in switching off general trade direction for the other, which is probably what is on most peoples minds, in the current or perhaps more accurate to say in the recent past conditions, without knowing the future.


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## yonnie (8 August 2007)

thanks guys

is wyckoff into shorting too?

any books of his on this subject?

thanks


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## motorway (8 August 2007)

yonnie said:


> thanks guys
> 
> is wyckoff into shorting too?
> 
> ...




...



> Of all the things that are most desirable to know about the stock
> market, these two are most important.
> 
> 1) First, to be able to determine the final top of a bull market,
> ...


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## yonnie (8 August 2007)

thanks motorway,

wonder if anybody can really determine all the tops and bottoms of the markets, swings and moves.

are there firm rules or is it discretionary?


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## motorway (8 August 2007)

yonnie said:


> thanks motorway,
> 
> wonder if anybody can really determine all the tops and bottoms of the markets, swings and moves.
> 
> are there firm rules or is it discretionary?




There are Absolute Principles from which  flow contextual Principles and Rules


Can all tops and bottoms be determined ......... Absolutely !

Determined is not predicted
There is an element of anticipation , of opportunity being seen to be born mature and ripen... That only then needs to be identified

What represents  the window of opportunity is what Wyckoff called the 
hinge and springboard

Here is some ore that can be refined to GOLD

motorway



> Some people regard a stock (or the market) in this (springboard)
> position only when it breaks through an old line of resistance or
> support into a higher or lower field. I claim that the beginning of
> the springboard move is at the bottom of a range of accumulation, or
> in the upper levels of a range of distribution.






> Have patience to wait out a situation until you see it is ripe for
> an aggressive move. Then act promptly. Do not debate whether it
> would be better to wait for positive proof of the correctness of
> your decision. By the time you are 100% certain, the move will have
> ...






> One who can operate only on the long side of the market is only half
> a trader. He sees everything through the eyes of a bull. He thinks
> everything is always going up. He never can see any money on the
> short side. The truth is, a chronic bear has a better chance of
> ...


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## tech/a (8 August 2007)

> Of all the things that are most desirable to know about the stock
> market, these two are most important.
> 
> 1) First, to be able to determine the final top of a bull market,
> ...




*This in all its simplicity is all you need to know.*

Its learning and application can be approached in a number of ways,but clearly you need to be able to identify with some form of accuracy these points.(Something that can/will take years,many books,lectures,tutorials and ofcourse software).
Personally I have found a combination of Fib,Elliott and VSA to be the best way of doing this.I guess exponents of Gann would include that.


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## Chorlton (8 August 2007)

motorway said:


> I took a
> position on an average of once a month. Five or six of these
> campaigns showed losses. These were small, because a stop order was
> always placed on each trade. Result: A very satisfactory net
> ...





Great advice IMO regarding the subject of Risk / Money Management......   

Also, Thanks to Motorway and others for constantly posting their knowledge on Wyckoff and his methods. Its clear that there is much more to him than simply VSA which is what I lot of people initially believe.......


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## yonnie (8 August 2007)

sorry guys, but I think I get off here.

I`m just no prepared to put in years of study to be able to name the top and bottoms of the markets, swings etc etc.
I know my limitations.

I think I`m just content to ride the wave as long as it lasts until the fundamentals have changed one way or another.

No 100 mils for me, but just content with 10.

thanks for all your help guys.


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## weird (8 August 2007)

yonnie, 

nothing to be frazzled by, 

I think Chorlton summed it up very well with some of the more important and directly usable points, with the emphasis on that last quote.


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## yonnie (8 August 2007)

thanks weird,

yes, I`m definately going to read Weinstein for shorting stocks but as for determining the tops and bottoms and years of study to be able to do that

lets say I`ll just leave that to  the brainy ones amongst us that have that kind of ambition


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## weird (8 August 2007)

Well, an often quote is that trying to pick tops and bottoms is a mugs game, with the analogy of trying to catch a falling knife ... however for us mere mortals, without a high strike rate in doing this, keeping the reward to risk ratio right, you may not have to be right that often, to profit anyhow.

My understanding of Wyckoff is that your selling into weakness, and buying into strength, so no need to pick absolute bottoms or tops (which I know Motorway or Tech/A were not suggesting), it all comes down to reward/risk anyhow ... not being right 100% of the time.


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## motorway (9 August 2007)

How many thought of shorting as mkts tried to make new highs ?
How many thinking about it now ?

I picked the quotes because they encompassed some Wyckoff principles

It is not about predicting a top or bottom ahead of time
Or catching knives etc

It is focusing on the underside of pattern

Wyckoff suggests that  We might be better 
served by looking at the selling waves to see when We should go long

And looking at the buying waves to see When We should go short

Think of a see saw... What end do You focus on ? So as to correctly coordinate and be in harmony...

Don't You watch the opposite  end as it  pushes  off So You can naturally anticipate...  Or do You just focus on Your half as if it was all there is and You make Your moves out of step and harmony with bad timing ?

The quote on where the "springboard" is is VERY important..

The more timely You determine .. The lower the risk the greater the reward
In step and in harmony coordinated on the See Saw You are Safe from most
violent actions.. No matter what the other end does You are ready

" It moves and You move first " because 
See saws and mkts move in waves up and down of, Buying and Selling

By focusing on waves and esp the contrary waves

Waves of a certain Price movement ( Direction ), Duration ( time ) , Volume  and in the context of a certain position...

The top of a rally etc can be determined... When You have enough evidence confirmation  etc You act... 

Talent Skill experience build so You get better ( earlier ) in determining..
You minimize risk You maximize return


You recognize the context of what is happening and how it is happening.

Is that low volume You might see  a lack of demand ?
or an absence of supply ?

Two sides of the see saw.. But two sides that  are connected !


Demand and supply intersect
What We see as two are  one..

Now, Working from sound principle..
What is the limit ? I think the Sky..

Think of Turf Betting.. The Horse races... 
The form aways moves away from the public
They  are always on the Beaten Favourites

And that is a losers game

Wyckoff stated this in many ways...

To make any profit 
You must have a higher price at exit than entry ( longs )

So It is about structure ( tops and bottoms ) and process/flow ( markup/markdown )

All successful methods involve determining tops and bottoms
in some sort of way .. It is just a case of how finely they can be determined and where the lowest risk and highest reward junctures really are..

For a long... This has to be where the selling waves are tiny and have no following ( When the other side of the see saw starts to come down )
for a short it is where the buying waves are mere ripples

A last point of support
A last point of supply

Buying and selling waves following each other gather followings and
leave behind artifacts

like the waves and winds leave behind patterns in rocks

artifacts

like moving averages etc

You can engage in the moment and just do it.... 

"it moves and You move first"  seems like magic
But it is really just watching both ends of the see saw
When most people are only looking at one !

piling on to the next "Beaten Favourite"

as the waves of buying and selling unfold



motorway


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## yonnie (9 August 2007)

very poetic motorway, I almost see the sea coming and going, feel the wind and see the seagulls flying.

weird said you cant determine the tops and bottoms, but can you as it is happening?


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## motorway (9 August 2007)

You would have to ask Weird to be sure what He meant 

But I did not take that meaning

He said something about an oft quoted quote

But 

Made  the comment that while one's strike rate might be low

With good risk control 
The rewards could be such that one might not have to be right too often..

And The gist of My posts were that with application
one might see "too often" become more often..

Here is another Wyckoff Quote

It goes something like this

It is not how often You are right compared to how often when you are wrong that really matters..

But the fact You lose peanuts When You are wrong
And make bucket loads when You are right...

If We are analyzing
Waves of buying and selling


> as it is happening




Well What are We doing but determining tops and bottoms
on all magnitudes

There  is a bottom of a bar
There is a bottom of a reaction


Now We see a top of a bar , of a rally.

and here is the current position 

I determine it through observing  a series of tests and responses
that the waves of buying and selling themselves play out..
When I have enough to determine ... I ACT..

But



> Remember this:
> 
> A chart indication means that a stock is probably going so far in a
> certain direction only so long as its behavior continues to conform
> ...




and



> The first rule in successful trading and investing is: Cut losses
> 
> The way to do this is: First, never make a commitment whether for
> investment or speculation until you have decided, in advance, where
> ...





Note the order... First identify the danger point.. What is it that would negate You bullish or bearish definition...

Then

The danger point determines the vicinity of the stop..

Now We can look to the entry and reward  and see how close to that danger point We can be...



> Never abandon the use of stop orders.
> You may think you have so much money you cannot lose it. Thirty
> million people thought that in 1929. Very few used stop orders. I
> know, or know of, several who lost $100,000,000. They did not use
> stop orders.




A 100,000,000 in 1929 ! OUCH !



> Always keep in mind that:
> 
> Stop orders should NEVER be changed so that your risk is increased.
> All changes should be made for the purpose of reducing risk or
> eliminating risk or making sure of part of your paper profits.




OK This is a type of method
 The wyckoff Method

You will find bit's of it all over the place.


Defining , determining "danger points" is what the method is about

Yes You do this 







> as it is happening



..

Because , really what is happening is all that matters it is the Right hand Side of Your chart.. It is  NOW..

There is Price, Time and Volume
everything else is a derived and removed from 



> as it is happening




cheers yonnie

motorway


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## yonnie (12 August 2007)

thanks motorway.

can you determine if the high of the S&P200 at 6,4ish will be the high for this bull market or is there no way of knowing that?

thanks


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## motorway (13 August 2007)

What I can say 

Is that the mkt was fully extended
Because it had used up all it's potential

In going sideways at the top
It was building more potential

Potential in Wyckoff terms is called Cause ( that will lead to an effect )
And is produced by the "work" in a trading range

measured in the swings of the CM ( composite man ) not time..

eg the speed of activity ( the amount of work ) in one bar on a daily bar chart
is significant greater at the present time...

Bar charts are effort Vs result charts ( the work is measured in periods of time. effort = volume , result =  price movement )

P&F are cause and effect charts ( price is scaled Vs swings )

They highlight congestion and measure ranges ..

All charts have the same width measured in time 
But different width measured in swings

other ways to measure swings but P&F have distinctive scaling and trending properties and highlight particularly  areas of congestion...

Where do We measure cause from ?

Here Preliminary supply (~22feb )and ending action (~9may)

Give two downside objectives

5700 (coincides with 50% halfway point retrace from previous stepping stone)

4800 ( absolute objective only comes into the picture if there is no ending action in the vicinity of 5700 or a stepping stone is built at that level )

5700 takes the action back to the main trend line...


Objectives are points of stop look and listen

areas of anticipation only 

Those Who have downloaded some of the Wyckoff papers might like to look at the brief allusion to the the "ICE STORY"
and the "nine selling tests"

5700 looks very doable

Watch the following in the waves as they unfold

Following is gauged by stride and volume which together reveal an ease of movement.

Watch for Change of behaviour in those waves esp the down waves..

anticaption is not predicition 



motorway


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## Edwood (13 August 2007)

motorway said:


> Here Preliminary supply (~22feb )and ending action (~9may)
> 
> Give two downside objectives
> 
> ...




cheers for that Motorway


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## noirua (13 August 2007)

"Bear Essentials" by bear raider, Simon Cawkwell, aka Evil Knieval


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## Captain (13 August 2007)

Hi guys. If I can add some thoughts to this area.
A friend put me onto Jeff Cooper as one who has developed a good system to generate trades both up and down. (I should note that personally i generally only trade long, as it suits my style and available time.) His principles are worth study for any trader and gives an insight into the market and what the big boys activities' mean for us little fish.
So for shorts you just reverse the signals on charts that generate long trades. Mostly his trades are only a few days (although he does intraday as well), with very close stops. His signals are neat and though not infallable are worth a study by serious traders. He will trade up or down as long as the S/T trend continues. He tends to avoid "penny stocks" but his trades work with any stock really.
He has DVDs and books - Hit & Run Trading I & II. I should note that these are ok to use except he uses the American practice of fractions for some trade prices ie 1/2, 1/4, 3/8 etc which is annoying for us here.
Otherwise it is well worthy of study for price movements in the market and how he discovers them.


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