How I Screwed Up These Two Near-Perfect Calls To Sell Short

Posted by timothysykes on Fri 2nd of May, 2008 06:22:42 PM

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Take a look at my latest two trades—shorting 1,200 shares of probable-fraud spam-happy BSHF into a morning dip at $2.55 and 1,000 shares of failing business-so-let’s-float-a-takeover-rumor VM into a nasty slightly negative close yesterday at $4.01—both of which tanked 15%+ within a few hours of market action of my shorting. Great calls to be sure, but I somehow managed to screwed both up–and judging from the comments, I’m glad many of you guys did better!

Unfortunately, the BSHF pattern appeared the day before this new website went live and since it didn’t tank in the early morning EXACTLY like I wanted, I covered for a $75 loss since I had a million things to do to make the launch. Didn’t feel guilty about it until later in the day when it tanked 50 cents/share in a perfect representation of a spam stock falling apart! Sad sad sad, but one of those rare unavoidable situations.

bshfbreakdown How I Screwed Up These Two Near Perfect Calls To Sell Short

I have no excuse for taking quick 5 cents/share profits on VM–just my ferret-on-crack-like impatience–same exact breakdown pattern—actually an even better pattern considering BSHF hadn’t had a negative day yet—I just got scared out by the fact it didn’t tank as quickly as I expected (as I originally posted pre-market HERE)(notice I even anticipated a morning bounce ughhhh!)

vmbreakdown2 How I Screwed Up These Two Near Perfect Calls To Sell Short

When the big tank came later in the day, I couldn’t re-enter due to buying power restrictions, just the latest example of how absurd the pattern day trading rule is, and certainly not the last.

In both cases, I was right to take short positions aiming for morning panics, but the stocks didn’t act EXACTLY the way I wanted and I—not being patient/having too much other stuff to do—played it safe and got out, basically pathetically losing $50 between the two.

The good news is we know this happens with me–far too often–so you have two choices: a) you can play it safe like me and either breakeven or take small profits or b.) have some patience, take on a little extra risk and hold longer, seeing if this strange pattern is really all it’s cracked up to be.

Either way, I think it’s fair to say I’m beginning to prove PennyStocking, and more specifically this one pattern, is viable cuz it’s not your typical-money-losing strategy (as 90% of traders unfortunately experience) and it CAN be played using very little risk—smack in the face of public opinion regarding Penny Stocks and Short Selling, let alone this combination of the two.

So, next week, no traveling, no more website bugs, my head will be clear and I’ll look to play similarly worthy opportunities with the goal of not only enriching my readers’ trading accounts, but also own account!

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Related Reading

Minimizing Trading Losses: Two Overnight Trades That Didn’t Go So Well April 19, 2008
How To Short Sell Penny Stocks Safely: Three Quality Short Trades June 4, 2008
How To Reserve Shares To Short On Hard To Borrow Stocks June 1, 2008

YngvaiMalmsteve

Hey, Tim, I'm curious what you think of setting small "stop-loss" rules for when to bail on a short. I bailed on VM way too fast, and I've been considering giving myself a 7.5% rule on trades (whether going long or short)...if it goes 7.5% in the direction that I wasn't anticipating, then it's time to bail. If I had a rule like that, I would've stayed with VM and made a nice profit rather than losing a small amount (I shorted at $4.02 and bailed on the bounce at around $4.13). I've had some other recent long trades I bailed on too quickly and missed profits. Of course, there will sometimes be exceptions, but I'm thinking setting a general rule will help me be more patient.

timsykes

i've never used a stop loss in my life, when these stocks go against u, they blow far too quick for your stop loss to do much of anything

noobtrader.08

I like the idea of setting a stop-loss "rule-of-thumb" too. My understanding is when you set a "comfort" rule for yourself, you never break them.

I think I would keep my stop loss at 5% though... I guess I'm a chicken shit. =D

YngvaiMalmsteve

I'm currently setting a complete list of rules for myself, based on my past failed (& successful) trades. Most of my losses (although small) were because I broke these rules. I'm toying with a 7.5% stop-loss rule, with much smaller %'s in certain situations (to avoid the types of run-away situations Tim is talking about). I'm also setting rules for what types of trades to enter and what types to avoid.

I'll keep you guys posted on how my rules pan out and if they're successful. They're also going to evolve based on how (and if) they work.

noobtrader.08

Cool. I'd be curious to see what your rules are right after you implement them and then see how you've done, sticking to those rules, after May is done.

I'm a total stat dork that way.

Either way good luck.

YngvaiMalmsteve

Yeah, noobtrader, the other reason I want to set rules is to help keep emotions out of the equation. I'm only working with an account of $2K, so while I've been good at keeping my losses small, I'm on a streak of small losses that really start to add up when you're dealing with such a small account size. And some of those losses would've been nice gains if I had been a bit more patient (the other losses would've been trades I would've avoided had I set rules). So my rules will help me establish a certain amount of patience (but not too much!).

noobtrader.08

yeah, everything I've read, and more importantly what i know about myself (and have in common with Tim) is that I have ferret-on-crack-like impatience too, so temptation and/or impulsivness MUST be contained and the only way to do that AND prevent bottomless losses is to set rules.

As my nickname states I'm a NOOBER-BOOBER-wanna-be day trader. But I (WE) will learn, and I (WE) will succeed; as Tim leads us mions up the financial ladder... 1 "short" at a time.

Tony Ellis

Keep up the good picks. I might have to switch to a real broker that allows me to short under $5. Anyone make any $ going long GTE, VIV, or JRJC? I had gains on all but none turned out to be great plays and my timing wasn't great.

p.s. HOw do I get my picture next to my comments?

YngvaiMalmsteve

Tony,

I bailed on my long JRJC position when it dipped to around $21 today. Now, if I had rules set for myself like I'm planning on doing, I would've waited longer and would've ended up making a profit when it hit $23.50.

YngvaiMalmsteve

Yeah, I also second Tony's question. How do we set up our avatar?

jj

hey Tim...are you going to be at any of the traders show expos? http://www.tradersexpo.com/msc/tradersexpo/main...

Tony Ellis

That's a tough loss on JRJC. I sold @ 22.98 at the open. I'm taking profits quick on everything right now. I don't use stop losses but I always sell when a stock goes negative for the day. A strong breakout generally won't go negative for the day. I'll buy again if it goes green on strong volume in the afternoon and is above breakout level.

Adarsh Dilip (moderator)

Hey Tony - just go to http://en.gravatar.com/ and upload a pic there - and it will show up here automatically everytime you sign in.

timsykes

i dunno about traders expos, considering i say the whole industry is full of shit, its kinda tough...i'm planning a speaking tour thats gonna be unlike anything anybody in trading's ever done....

UFgemini

I tried shorting FEED yesterday and get raped in the process. I need to work on my entry points better. I am still holding onto this one over the weekend. As volatile as this stock is, I should be able to recoop some of my money lost.

ivegotstylekid

wow, I'm surprised you covered that early. Made a nice profit in my wallst survivor acct. Shorting VM and RT. Up 2000 on the day.

timsykes

sorry to hear about shorting feed, i'm telling, shorting these momo stocks is not something u do randomly--forget about should make it back, thats how big losses are created as they could squeeze this thing to the 20s

monkiman

rape?? lol.. thursday was FEED's fourth day down... very risky, has chance to retrace or trend upward...

UFgemini

I hear ya monkiman...I just thought with it being the 4th day down, didnt think it was going to go past its 52 week high. It will be an interesting monday at opening.

noobtrader.08

Thoughts on Long vs. Short; which is better? I realize this question is subjective, but I'm curious to hear what everyone's opinion is.

In as much as I'm a noober-boober wanna-be day-trader, I would like to do both, however my (trading) bread-n-butter will be shorting. Entry points are crucial, which I'm still not 100% clear on... what exactly is a "good/great" entry point for a short?

noobtrader.08

ivegotstylekid,

what was your entry and exit points for VM? Did you buy before or after that $2.40 bounce?

How Bubba Sees It

Tim, you got too many irons in the fire. When it comes time to do the branding, you do your ferret thing. But, pick 'em for us, we'll trade 'em and laff all the way to the next trade. When you made your million +, you were probably concentrating on the market and you ain't doin' that now. Yeah, you pick 'em, we'll short and post how well we did with your short picks. It's getting tough to keep reading how you screwed things up for your shorts. Bubba's got respect for shorting $ to the account based on some of your picks. Bubba's gotta say thanx, but Bubba wishes better luck for you to hit your $M again. Like I Ching say: Perseverance Furthers.

timothysykes

actually when i made the most $ i didnt follow the markets that closely--that way i was able to hold longer and ignore the intraday gyrations and noise...which is why i think people who do this part-time will do better than me

ivegotstylekid

hey noobtrader,

I shorted at 4.13 waited a couple minutes after the open for the good news on the market to fade, and cover for a .53 cent/share gain. Too bad it's fake money, but it's still fun.

Just bought a book called sticky stock charts to get a better understanding on chart trends, pretty good so far.

noobtrader.08

That's a wicked gain "stylekid". Fake money? Which site are you using? I've got 10K (real money) that I want to start trading. Obviously attempting to follow in the footsteps of Mr. Sykes.

I'll check out reviews for that book you mention; thanks.

That said, I'm not doing anything until I order Tim's DVD set and perhaps sign-up (free of course) to a website that offers, artificial trading... so I get a better feel for it. Reading charts, shorting, etc. On this site you use, how many stocks do you trade at a time?

Tim, for accounts UNDER 25K, using TOS as my broker, how many trades a day/week do you get?

timothysykes

supposed to be limited to 4 trades, but i seem to be able to get away with 5-7, the key is not abusing my buying power

ivegotstylekid

noob,

check out wallstreetsurvivor.com they have a portfolio challenge on there, pretty fun place to try out some of your own ideas

noobtrader.08

Tim, I'll assume because you're you, you can do that; such is the life... =D

Stylekid, thanks for the site duder... I'll check it out and get back to you with a progress report. =D

Are you using that site too?

noobtrader.08

Tim, Question...

On the BSHF chart (above), that bounce at 2.40...

A.) Is this "predictable" behavior or is it a dice roll? (I think this is an obvious answer...?)
B.) Is this an example of where your ferret-on-crack impatience gets the best of you? i.e. you would cover your short IF you saw a stock bounce back to the 2.50 range, rather than ride out that bounce and wait for the plunge?

ivegotstylekid

yep, i just signed up last week

Bryan

If you speak in DFW Texas I'm going to see you speak. You have inspired me to one day attempt to run my own hedge fund.

noobtrader.08

Stylekid,

What's your screen name on WSS?

ViarronTeavomo

nice work, guy

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Date	Stock	Buy	Sell	Net
Nov 19	AENY	$2.80	$3.02	$1148
Nov 18	NLST	$4.16	$4.40	$947
Nov 18	IMGG	$1.42	$1.64	$2094
Nov 17	NLST	$5.04	$5.59	$2195
Nov 13	VRMLQ	$21.50	$22.97	$2901
Nov 11	EONC	$2.61	$2.80	$687
Nov 10	EONC	$2.74	$3.36	$9784
Nov 6	QXM	$4.31	$4.80	$1936
Nov 4	COT	$8.66	$8.88	$642
Nov 4	QXM	$4.61	$4.89	$822
Oct 30	DDRX	$25.70	$26.53	$812
Oct 29	CTDC	$4.00	$4.42	$781
Oct 26	AWSL	$3.24	$4.10	$2516
Oct 23	RODM	$5.27	$5.23	$301
Oct 22	AMLM	$2.69	$2.97	$820
Oct 22	USEG	$6.12	$6.09	$85
Oct 20	CBOU	$8.93	$9.06	$243
Oct 16	VRMLQ	$16.79	$18.65	$2773
Oct 13	YONG	$11.05	$11.66	$1202
Oct 13	NPHC	$0.59	$0.71	$583
Oct 12	IMGG	$0.60	$0.70	$682
Oct 9	ZAGG	$5.50	$6.10	$2380
Oct 7	GVBP	$0.03	$0.27	$702
Oct 1	NPHC	$0.70	$0.85	$1482

Total: $98,094 (681%)