Electronic Shorting

The major problems with shorting come when you hold the stock

overnight. When you short the stock intraday, the vast majority of

problems with shorting vanish. In my humble opinion, shorting

stock electronically intraday is the best way to short. If you are

wrong on the direction, you still will lose money but you don't have

the other problems that plague short sellers. You can also exit the

trade, thus keeping your loss small.

Now that you have the basic information you need about the

concepts of shorting, let us address the subject of shorting stock for

short periods of time using ECNs (Electronic Communications Networks)

to route our trades.

High-Probability Shorting Methodology

There are two strategies for shorting stocks that have a highprobability

outcome. The first strategy is to find stocks that

are extremely overbought. The second strategy is to find stocks

that are at the beginning of or in an extended bearish trend. Both

of these methodologies involve a screening process. Successful

short-term trading generally is based on long-term analysis. When

you are looking for stocks to short, you will use daily bar charts on

one year of price data. Analysis of this time frame will reveal stocks

with the highest potential to short. Our objective is to first find

stocks that are in an extremely overbought condition and stocks

that are entering an extended bearish trend. Let us examine this

screening process.

The major problems with shorting come when you hold the stock

overnight. When you short the stock intraday, the vast majority of

problems with shorting vanish. In my humble opinion, shorting

stock electronically intraday is the best way to short. If you are

wrong on the direction, you still will lose money but you don't have

the other problems that plague short sellers. You can also exit the

trade, thus keeping your loss small.

Now that you have the basic information you need about the

concepts of shorting, let us address the subject of shorting stock for

short periods of time using ECNs (Electronic Communications Networks)

to route our trades.

High-Probability Shorting Methodology

There are two strategies for shorting stocks that have a highprobability

outcome. The first strategy is to find stocks that

are extremely overbought. The second strategy is to find stocks

that are at the beginning of or in an extended bearish trend. Both

of these methodologies involve a screening process. Successful

short-term trading generally is based on long-term analysis. When

you are looking for stocks to short, you will use daily bar charts on

one year of price data. Analysis of this time frame will reveal stocks

with the highest potential to short. Our objective is to first find

stocks that are in an extremely overbought condition and stocks

that are entering an extended bearish trend. Let us examine this

screening process.