Jul 22

Advice From Greg

Tricks of the trade 1 Comment »
Shorting – The RulesIt is essential that :

  • We only short stocks that are in sectors that are not in the current economic cycle phase, and are also not performing.
  • The stock is below both of it’s moving averages (50 & 200) or is breaking through it’s moving averages.
  • There is negative sentiment surrounding the stock.
  • You always have a stop – otherwise you could end up taking never-ending losses.
  • You have a risk to reward ratio of at least 1:3.
  • You adhere to correct money management.

The Fundamental Rules

Ideally the stock would have :

  • Negative current assets
  • Decreasing revenues
  • Operating margins of less than 10%
  • Confirming indicators
Ideally the stock would not :

  • Have a high PE – as there could be a good reason why and it may move higher.
  • Be a thinly traded small cap stock – as these can be easily run up in value.

The markets have been less predictable

Current volatility requires more focus on :

  • Price action of the stock
  • Setups (Reverse power plays, descending triangles, double tops etc.)
  • Market direction
  • News
  • Oil

With the market failing to find any longer term direction you need to be able to trade long and short.

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