Best book on shorting stocks

[weird]

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.

 

[motorway]

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

 

[yonnie]

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?

 

[motorway]

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
with the original indication. You must always be on the alert for
changes and be expecting your chart indications to be reversed.

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
the danger point exists in that stock. Second, calculate the
possibilities for profit if the stock should confirm your judgment
by moving in your favor. Third, determine whether the indicated
probable profit outbalances the indicated risk by at least three to
one. Fourth, place a stop order (under the danger point on a long
commitment and above it on a short sale) the moment your buying or
selling order is consummated.

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

 

[yonnie]

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

 

[motorway]

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

 

[Edwood]

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...

5700 looks very doable

motorway

cheers for that Motorway

 

[noirua]

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

 

[Captain]

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.