How To Short Sell Stocks: Why It’s So Important To Trade Scared And Use Protection
Posted by timothysykes on Thu 27th of Mar, 2008 03:47:57 PM
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Early morning, reserved shares in 3 hard-to-borrow stocks, all multi-day runners, COIN, WSCI and REED. Since I typically do better with low priced stocks, I focused all my attention squarely on REED…mistake #1 (today’s only its 2nd big up day, not 3rd or 4th when its infinitely more likely to run out of steam) WSCI and COIN both took nice morning dips (though neither ideal WSCI just made a massive cup and handle and COIN, well, it’s COIN, enough said)…missed ‘em both since my 3 screen monitor busted and I’m on a laptop
TIM Lesson: Either use multiple trading screens miss simultaneous opportunities, the more screens the better…up to a point
In the first hour of trading, I considered shorting at $3.89—solid big sell orders padding me above—but all the trades were buys and a morning squeeze was possible…10 min later the squeeze was on and once it took out $4, it went straight to $4.50…I thought $4.50 would hold (yesterdays high) so I shorted 1,000 at $4.39 with the goal of buying into a quick reversal around $4.
But $4.50 didn’t hold and as it went to $4.60, then $4.70, I was annoyed but not angry nor concerned…this is a true POS stock with lots of bitter shareholders (as evidenced by yesterday $1 drop off its highs) so if it kept going, I’d just double up…but over the next few hours, big sell orders padded $4.40-$4.50, only thing stopping a big drop were some buy orders at $4.30…gradually those got taken out and when it was $4.07 x $4.10, buyers quickly ate shares up at $4.08, so I thought about covering…but my greedy little Jew mind said no, that’d only be $270-ish profit after commissions, not gonna take me over $17k. I’d wait to cover this time around—to get some big profits under $4
TIM Lesson: With these illiquid little things, you gotta take your profits and run, the spread alone can kill you not to mention the risk of any squeeze
Wrong wrong wrong wrong wrong way to think about it. You think REED cares whether I get over $17k, no, you take your 7% profit and move on. Idiot. I deserved to lose on this trade, only an idiot listens to ego over price action…bounce back up to $4.30-ish but I knew I’d have another shot at covering low…so I put my limit at $4.11—unfortunately showing 1,000 shares to buy right above a proven buyer just attracts more buyers (one advantage of having a non-online discount broker is you can mask your orders, showing only a fraction of the true amount)—and didn’t get it as other buyers came in at $4.12, and $4.13.
It bounced to $4.40, dropped again, but I still didn’t get my cover, frustratingly so, welcome to illiquid stocks…bounced again, buyers look determined so I tried covering half at $4.35, got 400 executed, saved 600…reduced my risk…still plenty of big sellers all between $4.40-$4.50…with my remaining shares, I was perfectly willing to risk a $60 loss (600 shares x worst case $4.50 exit minus my $4.39 entry) to risk it not breaking out and me covering at $4.11 (which would be $170 gain). After all, surprising strength aside, the buyers on the bid were few and far between, if we took out one, it’d drop 10 cents, one more, another 10…also helped that tomorrow would be the third day of the runup, aka very tough to stay green.
Less than 1,000 shares traded later, the bid dropped from $4.35 to $4.14—signaling the strength was temporary. Still couldn’t cover on the bid, buyers in the teens look steady so I covered at $4.26, $65 total gain…not a bad trade, with all the big blocks protecting above, I’d either make a little or a lot, made a little.
Stock finished with even more surprising strength in the $4.40 range, methinks / mehopes we get another squeeze tomorrow…same strategy, maybe even buy some on strength first and then turn around and flip it, we’ll see, price action not ego based trading, remember, remember or your account will be dismember-ed
Now you can Twitter any questions/comments to TIMhelp and obviously you can follow TIM on twitter too!
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TIM Alerts
View All| Date | Stock | Position | Ideal Exit | % Gain |
|---|---|---|---|---|
| Nov 24 | KVHI | Short | $3.70 | 18% |
| Nov 20 | STSX | Short | $3.10 | 11% |
| Nov 18 | PERY | Short | $3.75 | 25% |
| Nov 11 | IIJI | Short | $2.80 | 5% |
| Nov 6 | CVI | Short | $4 | 15% |
| Nov 5 | MECA | Short | $1.95 | 51% |
| Nov 4 | CVI | Short | $4.81 | 4% |
| Nov 3 | NAK | Short | $3.20 | 5% |
| Oct 29 | EVC | Short | $2 | 26% |
| Oct 28 | HSNI | Short | $6.80 | 7% |
| Oct 28 | HSNI | Short | $5.75 | 4% |
November: 9 alerts, 15% avg gain
October: 11 alerts, 14% avg gain
What a douchebag you are man….Godamn….
I need to give you some points though, for selling “educational” crap to the idiots on here…
Glad I went w/ you thoughts on BPAX when it was trading around $3.94. I held back and I’m glad I did! Better opportunities out there! Thanks!
Tim, baby, you are the man. No one gives a better description of their trades than you. This is the type of thing I’d like to see in your website. Detailed descriptions of your trades as I voted for.
This is the only blog I come to everyday hoping you made a trade. Can’t wait till you get to the 25K mark. We’ll see the Timmy of old start teaching the experts first hand what a real pro can accomplish on an all cash account not leveraged 32-1.
hey tim just wanted to take time to thank you for the “educational crap” that you’ve taught me through your book/site. i made $1200 monday off BSC after checking your site first thing in the morning, and haven’t made a bad trade since you advised me about AAPL back in Jan… your strategy does work (regardless od what some say), you just need some balls to go along with the know how. i think we can all figure out what qualities someone who posts under “Noname” lacks. ill see you at 17k soon!
Hey Tim, thanks for posting your trades in such detail.
About the liquidity issue, why trade something so illiquid? aren’t you afraid of the horrible spreads on such tight profit targets?
and if you just have to trade stocks like these some days why not scale in if you want to place such a large order relative to the daily float? (in this case around 3%)
Tim,
When can we short ASTI?
U da man!
thanks guys, even noname (considering how you fail to back up any of your “commentary”)
REED I believe is no different than other illiquid runners like SHZ, DARA and VION (the last which is now 45 cents below my “decent” cover LOL) just gotta wait til the momo runs out, hopefully it can have a super friday squeeze…(scaling in and out is what i usually do but not with TOS commissions in relation to my capital right now)
Tim, I want to thank you for great and creative use of multiple personalities. You advertising affiliates should discount your traffic by 80% since that much of it is you trolling the blog.
As far as the “educational” crap, I wonder who in their right mind is taking your shit for granted…momo? Dude that was the raging bull of 1999…
Grow up, smell the coffee, and realize that you were a monkey who had a BUY button to press on during a wave of stock market profits…
Things have changes now, and the market is sophisticated…much more sophisticated than the idiots buying your CDs…and paying restocking fees…haha
Cheers!
I applaud you for calling yourself out on ego trading. You really are sincere about transparency!
Tim, look on the bright side, you had a $65 up day (you ever play the stock market, on REED?), on a stock I happened to notice, but have yet to play. whereas I had a $110 loss, cause I’m a moron (but I’m learning.. I think…)
I somehow had it in my head that TMA was going to have positive news about their liquidity issues today, thereby pushing this volatile stock up 30% or more. Nevermind the fact that I know nothing about this sector, or could find any news supporting my hypothesis, I just figured I’d let 1000 shares ride. I got in at $1.57 (another dumb mistake I wont outline here to try and keep this brief) and set my stop loss at .15. I went back to work (yeah, I have a day job, which really interferes with day trading).
Now a bit of background you may find interesting- I’ve followed the market for about ten years and have focused on the sector I’m comfortable with- technology. I had some money in before and did well, but for reasons I won’t get into I needed access to said funds. Fast forward ten years to about a month and a half ago, and I’m looking at AAPL thinking of how much my investment would be worth if I still had it, and thinking there is no way it should be selling for under $120. I decide to do something unlike me, and take a 0% offer on a credit card (I’m not hurting that bad for cash, but it’s free money for a few months) and throw 6k into a margin account. I managed to snag my 100 shares of AAPL for under $120, and life was good…
Fast forward a week or so, and I start to look at other stocks I’ve been watching and seeing similar opportunities.. I grab another 4k and throw it in the mix. I grab some other stocks right where I want in, and sit back. Happy.. Then I start getting itchy.. I see AAPL moving up and down and think I can take advantage of the situation.. Here comes the lesson to anyone bored enough to have made it this far- STAY DISCIPLINED! Had I stuck with my plan, life would be much better right now..
I decide I think AAPL is going to drop back down after it climbed to $122.6, so I sell off all 100 shares. The next day I don’t like the way things are looking, and get nervous thinking I made a fool mistake trying to scalp on a stock I planed on holding long, and so I buy back in at $123.8. Hey, I didn’t really lose anything, I just missed a bit of opportunity (at least that’s what I keep telling myself). Oh, and it did dip back down to $120 again a few days later, just to twist the knife..
Fast forward another few days- I’ll never make that mistake again! (gotta stay disciplined!), and AAPL is moving in a pattern I think I can profit from. I sell off all 100 at $126.8 and wait. Next day I get that same feeling like AAPL is going to keep moving up towards $160 (my 6 month target) without me, and I get scared.. Time to jump back in at $130.6, but this time I only grab 75 shares…
Another small 25 scalp of AAPL later, and we’re back here to March 27th.. I take a look at the market and see AAPL tanking. I’ve only got 50 shares, and want back in on the 50 I so stupidly let go. I see TMA moving a bit low, but still no news. I adjust my stop which ends up at about $1.48 for the day and keep watching AAPL.. Instead of just setting a simple stop market at $140 to grab the 25 shares I planed on, and watching TMA, I kept watching AAPL, mesmerized like a moth to the flame.. I grabbed 25 shares of AAPL around $140.46, about the same time my stop trigged on TMA (causing the $110 loss), which I should have lowered.. TMA is at about $1.68 after hours (a potential gain of $100) today…
I’m still up about $1500 on a little over a month in spite of myself (it’s probably more like $1000 after taxes, margin interest and commissions), thought it should be closer to $2500 had I stayed disciplined…
Let this be a lesson to you kids out there- Stay Disciplined! Oh, and never waste 4 minutes of your life reading shite I post.
PS- to all the haters out there, what’s not to love about the under dog story? Tim, I hope you do it again.
Wow that first poster was a duchebag bro and he didn’t even leave his name, number and address for you to mail a tall stack of meat-eater feces in a nicely gift wrapped box to his house and call his mom a cock whore. Some people these days, I swear. Anyways thanks for the great post keep up the good work and make shit loads of cash.
Hi Tim
I have just started my financial blog (http://simpletrader.wordpress.com/). Hope you and your readers find it useful.
Steven
Tim, got a kick out of your multi-monitor picture, but I dragged the photo on my desktop to send to someone and he told me there was something interesting in the top right of the photo…. on the distraction monitor… might wanna re-crop.
LOL!
hi tim you are a douchbag wahahhahahahhahahah
haters hate.
keept it going man your doing well.
Tim… How could you had missed COIN? I stated yesterday early enough to short the POS, you had time….
Uhhhh I see COIN up 70 cents premarket on 5k traded, I hate shorting that stock
Yeah, I wouldn’t hold a coin short over night- that morning spike is serious
Love the site! How do you reserve shares for hard to borrow stocks and what stock scanner would you recommend that I can get for free? Thanks man, keep up the good work.