@YourDudliness - thanks for the feedback. I was a bit surprised when I first had a look at the CFD Forum and found that there seemed to be very little activity. After following the STT threads for a while I have discovered that most of the Posters are what I call "Hold and Hope" investors. They look for sold down low cap speculative stocks, do some speculative fundamental analysis, buy lots of shares in the stocks they like (and in most cases they fall in love with these stocks), and then wait for the SP to rise. And you raised the question of shorting these stocks! I'm surprised the only response you got was a brick wall of silence. The STT poster also seem to think that "short term trading" can also involve holding shares for up to 1.5 years. To me short term trading means holding a stock for a maximum of 5 to 10 days. In my CFD trading system the ideal hold time will be 3 days.
I've been researching and developing a CFD Trading system for a long while now, but unfortunately have been going around in circles, until now that is. Thanks to my talks with @mistyrains my enthusiasm for completing and implementing a system was revitalised. I now have an initial technical system that includes setup and trigger conditions for going both long and short, and trade close conditions and triggers. At the moment there is no difference between my long and short trading system (the way in which the trades are setup and managed that is). My current problem/question is how I should prioritise the potential trades that will pop up in my daily searches, i.e. I know that there will be far to many trades given the capital I want to allocate to the system. The other question I have is exactly what is the acceptable drawdown I should expect and what system or process do I need to implement in order to manage the system overall. There are lots more questions as well, hence my tail chasing over the past year.
I am currently in the process of opening a CFD account for my SMSF with FP-Markets. They have offered me a no minimum commission for the first three months . This will let me make low equivalent capital trades and not be hit with large commissions. So I am going to start practice trading my system with initially only a small amount of capital whilst completing the design and testing of the system.
Well, enough of what I am intending to do. As I said I still have lots of system related questions which I am more than happy to share with others (the answers to of course). If you have any comments or questions please add them to the thread.
In answer to your initial question/comment; I currently treat short trades exactly the same as long trades, i.e. same indicators and setups but in the opposite direction, and my understanding is that the only reason shorting is more dangerous than going long is because effectively there is no natural limit to the amount you can lose on a short trade. Short trades where the price goes up have an unlimited loss potential as the share price has no limit. For long trades on the downside the SP can go to zero and no further. One very simple way of alleviating this risk is to have a protective stop in the market with every open trade. If you are worried about the SP gapping above or below your protective stop you can use guaranteed price level stops.
As I test my system with real money over the next few months I'll post the results and the conclusions and questions that pop up as I move forward. I am more than happy to share the basics of my system as it is developed. I hope to hear more from you and anyone else interested in CFD short term trading systems. I'll probable create a new thread in this forum titled "CFD Short Term Trading Systems".
