# Profiting from a fall in the Aussie Market



## pavilion103 (17 June 2013)

I've been trading the market long during the run up.

Now the market has topped and it looks like there may be some downside potential.

One way that I've been looking to profit from the global market conditions is to short the FTSE. 

How about the Aussie market? The SPI Futures is a bit rich for me at $25 per 1 point movement. 

What about shorting the banks?

Could it be worth shorting them on this current leg up? I'd be looking in conjunction with the broader market. 


Having watched the XAO closely and seen a topping pattern in real time it was frustrating not being able to trade the SPI due to my risk profile. That got me thinking about maybe shorting the banks instead. It would have been an excellent move. 

Just interested to see if others share similar sentiments...


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## CanOz (17 June 2013)

*Re: Profiting from a fall in the Aussie Market.*

Can you just reverse your scans and run them on the ASX 100 universe, then if you get a signal and they're available for shorting your in...?

Why is it different than going long? You need to be a bit careful in a takeover sort of environment, but patterns for shorts once the trends starts are no different than longs are they?

CanOz


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## pavilion103 (17 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



CanOz said:


> Can you just reverse your scans and run them on the ASX 100 universe, then if you get a signal and they're available for shorting your in...?
> 
> Why is it different than going long? You need to be a bit careful in a takeover sort of environment, but patterns for shorts once the trends starts are no different than longs are they?
> 
> CanOz





The thing is CanOz, I haven't spent a whole lot of time working on shorts. So this has been getting more of my attention in recent weeks. I'm unsure how different these setups are as opposed to the long side.

Yes I do have a reverse scan which I have run in recent weeks. I've also been looking at some of Radge's trades and analysing his charts.

I've been taking a few shorts (have about 3 open at the moment).  

Maybe I'll post some charts of setups for the banks as I see them unfold. Interesting to discuss it with people.


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## sinner (17 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



CanOz said:


> but patterns for shorts once the trends starts are no different than longs are they?
> 
> CanOz




I would say they are pretty different!


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## banco (17 June 2013)

I find looking for breaks of horizontal support in stocks that are already trending down works well.


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## chops_a_must (17 June 2013)

Sell some calls.

Buy some puts.


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## Boggo (17 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



CanOz said:


> Can you just reverse your scans and run them on the ASX 100 universe, then if you get a signal and they're available for shorting your in...?
> 
> CanOz




Weekly short scan (reversal of long entry scan) of the whole ASX based on today's data = DTL, FRI, SWM


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## sinner (17 June 2013)

pavilion103 said:


> The SPI Futures is a bit rich for me at $25 per 1 point movement.




pav, there is a listed ETF called ASX:BEAR. They invest solely in short SPI futures.


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## john12 (18 June 2013)

short the asx 200 as a cfd


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## CanOz (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



sinner said:


> I would say they are pretty different!





How so? Flags, pennants, descending triangles, ledges....

Enlighten me Sinner.

CanOz


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## sinner (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



CanOz said:


> How so? Flags, pennants, descending triangles, ledges....
> 
> Enlighten me Sinner.
> 
> CanOz




Market returns are simply not symmetrical, in any market, not even FX where the strongest structural argument for symmetrical returns could be made. If you've assumed that they are, it would be worthwhile to test and validate your assumption.

Pick any market. On a rolling basis, how much smaller is the average down day versus average up day? etc.


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## CanOz (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



sinner said:


> Market returns are simply not symmetrical, in any market, not even FX where the strongest structural argument for symmetrical returns could be made. If you've assumed that they are, it would be worthwhile to test and validate your assumption.
> 
> Pick any market. On a rolling basis, how much smaller is the average down day versus average up day? etc.




We are discussing pattern trading, or I was...how are the patterns any different sinner?

CanOz


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## sinner (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



CanOz said:


> We are discussing pattern trading, or I was...how are the patterns any different sinner?
> 
> CanOz




Patterns are just an arbitrary collection of daily returns CanOz. I am not sure how else to explain it.


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## CanOz (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



sinner said:


> Patterns are just an arbitrary collection of daily returns CanOz. I am not sure how else to explain it.




I'm just a visual trader sinner, I still don't understand what the difference is between a pennant in an uptrend and a pennant in a downtrend? I will agree that the targets will get hit quicker, as bear markets fall quicker than bull markets rise...

But I still don't understand what your getting at.

CanOz


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## Joules MM1 (18 June 2013)

*Re: Profiting from a fall in the Aussie Market.*



sinner said:


> Patterns are just an arbitrary collection of daily returns CanOz. I am not sure how else to explain it.




patterns arent arbitrary, the drawing of them is.....buying patterns selling patterns arent arbitrary, trying to isolate them correctly is usually arbitrary......tis the drawer not the pattern that is arbitrary.....yay!


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## pavilion103 (18 June 2013)

I'm frustrated by the lack of short-able stocks with IB. 

I wonder if, in a market like this, it's worth me cranking open my CMC account again if it gives me access to more shorts. I would only do this in a market like this one because the commission of $9.90 or whatever it is now is a big difference to $6.00. Particularly for the sized trades that I take. 

I don't want to miss out on opportunities. Might as well investigate because the account is already set up. 

Still putting my main focus on shorting the FTSE though.


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## tech/a (18 June 2013)

john12 said:


> short the asx 200 as a cfd




How's that working out for you?


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## pavilion103 (20 June 2013)

I'm thinking NAB

Short sell at - 29.32
Initial stop - 30.05

I'm very inexperienced with these type of shorts, so just my thoughts...

Come to think of it, am I even allowed to post in this manner? I don't want to be seen as giving advice but I want to discuss potential trade setups.
Someone please let me know the protocol.

Thanks


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## mr. jeff (20 June 2013)

tech/a said:


> How's that working out for you?




VERY well so far
pushing down nicely.

Banks will be next to watch for removal of stength. QBE was my favourite short.


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## CanOz (20 June 2013)

What is the rational behind this NAB trade?


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## pavilion103 (20 June 2013)

CanOz said:


> What is the rational behind this NAB trade?




Pushing up to the gap and previous resistance with volume decreasing. 

XAO a little push up which could result in another down leg soon.

Probably a low risk entry


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## CanOz (20 June 2013)

FWIW, this is what I was taught to look for....Bearish continuation patterns...

I wouldn't post entries and exits prior to the trade Pav, after is fine.

CanOz


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## pavilion103 (20 June 2013)

CanOz said:


> FWIW, this is what I was taught to look for....Bearish continuation patterns...
> 
> I wouldn't post entries and exits prior to the trade Pav, after is fine.
> 
> CanOz




Ok no worries.

Yes that sort of consolidation is what I'm looking for also. Whether it's a channel or a pattern like the triangle you posted.

I didn't communicate that in the last post sorry. I won't just take a stab in the dark and short without some sort of decent setup.


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## tech/a (20 June 2013)

mr. jeff said:


> VERY well so far
> pushing down nicely.
> 
> Banks will be next to watch for removal of stength. QBE was my favourite short.




Short myself FTSE this morning.

Nice pattern Can.


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## pavilion103 (20 June 2013)

NAB trade would be activated now


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## CanOz (20 June 2013)

I get allot of pattern fails on flags that are channels...but that's what i like about the patterns, they need to prove themselves before you enter.

Will post a few in another thread for US Stocks.

CanOz


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## Boggo (20 June 2013)

A quick scan brought this up. Quite a few others but in a much lower price range so may not be available everywhere as a short.


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## tech/a (20 June 2013)

Boggo said:


> A quick scan brought this up. Quite a few others but in a much lower price range so may not be available everywhere as a short.




Can I have volume with that?

Seriously on the chart please


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## Boggo (20 June 2013)

tech/a said:


> Can I have volume with that?
> 
> Seriously on the chart please




Like this ?
(last vol bar won't be complete as its a weekly chart)


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## mr. jeff (20 June 2013)

mr. jeff said:


> VERY well so far
> pushing down nicely.
> 
> Banks will be next to watch for removal of stength. QBE was my favourite short.




I note QBE up 5% on a bad down day.
Could be 1.50 in each share. 
Will put a chart up tomorrow if it looks promising.


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## skc (20 June 2013)

mr. jeff said:


> I note QBE up 5% on a bad down day.
> Could be 1.50 in each share.
> Will put a chart up tomorrow if it looks promising.




You are shorting QBE in this market? Do you know why it's up 5% today?



Boggo said:


> Like this ?
> (last vol bar won't be complete as its a weekly chart)




Tomorrow is FTSE rebalance and SWM is being downweighed. So there could be a funny match well down from today's close.


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## So_Cynical (20 June 2013)

skc said:


> You are shorting QBE in this market? Do you know why it's up 5% today?




USD? same reason CPU was up to....gota love timely diversification.


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## mr. jeff (24 June 2013)

mr. jeff said:


> I note QBE up 5% on a bad down day.
> Could be 1.50 in each share.
> Will put a chart up tomorrow if it looks promising.




There's your 1.50 per share.
AMP won't be helping sentiment now...


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## pavilion103 (25 June 2013)

BRU is my only short. Left most funds for FTSE futures.

Didn't want to tie up too much in the banks.


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## pixel (25 June 2013)

mr. jeff said:


> There's your 1.50 per share.
> AMP won't be helping sentiment now...




If QBE breaks $14.34, a double top drop threatens.


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## kid hustlr (25 June 2013)

just as an FYI QBE has a huge exposure to US bond yields. Its share price and US bond yield are highly correlated and have been for sometime. Us bond yields up = QBE up in the main


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## pavilion103 (27 June 2013)

Previous NAB trade would have been out at BE.

Another low risk setup short as it approaches resistance again on low volume?


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## fiftyeight (2 July 2013)

So from what I have read so far, the big winners can really skew the expectancy of a system.

How does this translate to shorting? I have looked at the maths a few different ways and cant decide which is correct.

Are you limited as the best you can do is the price falling to zero, ie shorting $1000 (borrowing $1000 worth of shares and selling at $1000 and then buying them back at say $0.001) profit $1000. Therefore you cant have the big 200% 300% winners to skew the system?

Or is more about increasing the R:R of the system (maybe you only risked $10 to make that $1000)?

So, have I missed something completely regarding how shorting works, expectancy or something else? Are systems designed for shorting very different from long? Or is making a consistent profit from shorting just much harder?

Apologies if this is the wrong thread

Fiftyeight


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## robz7777 (2 July 2013)

fiftyeight said:


> So, have I missed something completely regarding how shorting works, expectancy or something else? Are systems designed for shorting very different from long? Or is making a consistent profit from shorting just much harder?
> Fiftyeight




One point of difficulty is that shorting can be / has been banned during periods of market trouble.. How then can you accurately test when you wouldn't have been able to make trades, which possibly may have been what generated the bulk of system returns..


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## CanOz (2 July 2013)

robz7777 said:


> One point of difficulty is that shorting can be / has been banned during periods of market trouble.. How then can you accurately test when you wouldn't have been able to make trades, which possibly may have been what generated the bulk of system returns..




Shorting is not banned very often in the US, but yes quite frequently in other markets as political pressure usually overcomes common sense....

Most equity system traders i know that trade the ASX trade long only, likely for this reason. 

CanOz


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## skyQuake (2 July 2013)

The most u can make from a short sale is 100%. Realistically, you can make 60 or 70% from a great short, whereas a good long can turn into a multibagger (eg 500%)

Thus, I would think the bulk of the gains from any trend following system would come from longs rather than shorts


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## CanOz (2 July 2013)

skyQuake said:


> The most u can make from a short sale is 100%. Realistically, you can make 60 or 70% from a great short, whereas a good long can turn into a multibagger (eg 500%)
> 
> Thus, I would think the bulk of the gains from any trend following system would come from longs rather than shorts




Well said Skyquake


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## pavilion103 (2 July 2013)

Much would depend on the timeframe and if you are trading or investing. 

If you can identify good short trades you can often make quicker gains. 

I prefer long but see the value in trading the short side too.


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## fiftyeight (2 July 2013)

Cheers

Agrees with what I was thinking

Fiftyeight


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## skc (2 July 2013)

skyQuake said:


> The most u can make from a short sale is 100%. Realistically, you can make 60 or 70% from a great short, whereas a good long can turn into a multibagger (eg 500%)
> 
> Thus, I would think the bulk of the gains from any trend following system would come from longs rather than shorts




Another thing that fundamentally favours longs over shorts...

If a company is growing profits and dividends, the share price cannot stay low forever as investors will jump to those dividend cashflows.

But a company may make losses for a long time, yet it is possible for it to have a sustained high share price for whatever reason.


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## fiftyeight (2 July 2013)

I was also thinking along those lines as well SKC.

Also, if your time frame is large enough markets tend to rise. I am thinking that implies some kind of statistical advantage although small, over being long rather than short on a smaller time frame.

Fiftyeight


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## Trembling Hand (2 July 2013)

fiftyeight said:


> Also, if your time frame is large enough markets tend to rise. I am thinking that implies some kind of statistical advantage although small, over being long rather than short on a smaller time frame.




No thats wrong. Markets, indexes, rise because they are designed to pick winners. They dump the crap ones every quarter.

The number of stocks that last are quite small.


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## fiftyeight (2 July 2013)

Trembling Hand said:


> No thats wrong. Markets, indexes, rise because they are designed to pick winners. They dump the crap ones every quarter.




I was talking about 2 separate points. So yeah that what I was thinking 

Fiftyeight


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## pavilion103 (2 July 2013)

As I originally planned to do. I have placed a short on a bank. 

So that I obey the rules of the forum, I won't post details until after the trade is taken.


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## minwa (3 July 2013)

Puts are great as usually IV goes in your favor, they also cannot be banned by exchanges.


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