Slip Sliding Away

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Starting last Friday, I began executing a strategy I had been waiting a long time to commence. Specifically:

  1. Cull through a list of over 1,000 individual charts and set aside those I felt were best-positioned for short positions into a Bear Pen watch list.
  2. On a daily basis, going through the Bear Pen to draw from that list the lowest-risk items (I am not endeavoring to go "all in" all at once; I am starting off with the least risk items first, and installing those positions in blocks).
  3. As I continue to establish my short position, in tranches, I will – from time to time – update stop prices in order to further mitigate risk. Naturally, all positions have stops in place at all times. When I'm done, I suspect I'll have about 150 positions in place.

This is quite different from how some other traders – – even bearish ones – – are going about things. Some of them are "one-instrument" traders. Sol, for example, over at xTrenders, primarily trades monster-large positions on the /ES and with some amazing results. He has had a breathtaking recovery, after getting pummeled during the summer, and my hat is off to him.

But that's just not my style of trading. I'd rather get entrenched with a large number of positions (spreading the risk very thin) and ratchet stops down along the way, as opposed to doing "Hail Mary" kinds of trades. Take STT, for example, which is a position I established on Friday. This chart is very representative of the kinds of positions I am entering.


I shorted 190 shares of this at $52.81, and the stock is down nearly 10%. Now, the profit in absolute terms isn't huge…..$944 as of this moment. However, (a) get those kinds of profits across a platform of a couple of hundred positions and (b) keep reducing the risk by ratcheting stop-loss prices down as the stocks move down, and I'll have a winning combination.

All this is predicated, of course, on the market slowly moving downward. But it isn't dependent on a crash, or even a tear 'em up bear market. All I need is for prices to erode which, given the entire suite of circumstances, I am highly confident they will.

As for the idea of others contributing to Slope – – I got a lot of emails, and I invited those which seemed promising to contribute. I am keenly aware of the importance of retaining the social fabric and personality of this place, so don't worry about me wrecking that. I imagine some "outside voices" will appear from time to time, as space (and the quality of posts) allows. I, for one, am looking forward to seeing what our Guest Editors have to contribute!

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