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1/Thinking out loud, but think this may help others. I focus mainly from long side for simple reason: Stocks mostly go up. Revolutionary, I know. But when coding a neutral Long/Short Strategy, Long side almost always wins.
2/Short strategies require a different touch. I haven't quite cracked the code yet, but I will. In order for a profitable short strategy to succeed, It requires you, to take profit "Early" compared to a long strat... or it requires clear Profit target.
3/This may seem simple.... but it usually isn't. Defining when to say "okay, it's time to cover short" in a strat is very hard.
4/Using "oversold" conditions like RSI seems like an obvious first choice... but often times, you miss out on the bigger dump, and RSI tends to make new highs (positive divergence).
5/Using an MA crossover lags too much, and you tend to miss out on larger profit taking opportunities.
6/Understanding the market you are in, is paramount as well... is it a up? Down? or sideways market? If you're new, you may not get this now, but more experienced traders understand, that not all strategies work in all market environments.
7/Being able to adjust is paramount. But even still, generally speaking... Long only Strat is statistically speaking, more successful, Example: Reversal strategy in a down market... this can be highly profitable, but requires quicker profit taking vs Breakout Strat.
8/So if you're looking to develop a strategy... always focus from the long side 1st. Playing short requires a MUCH different approach, it is rare you can let a "Loser run"... because it's rare a stock goes to zero.
9/But if you're interested in short selling... understand, you need to be QUICK on the trigger, take profit into support, never assume the stock will continue to dump. My two cents...
Until then, I'll be hard at work on cracking this short selling code.
Until then, I'll be hard at work on cracking this short selling code.
