Before You Think To Go Short the Stock market index
How many Stock market Bears are itching to go short the stock market index? Probably too many to count. However regardless of all the fundamental reasons and thoughts to blindly go short the stock market index, this is not prudent. One could possibly listen to Paul Tudor Jones who thinks this is a bear market rally. BTW.. Paul Tudor Jones made a fortune predicting the stock market index would crash in 1987. On the other hand you have some Bulls that are predicting this powerful rally is just the beginning of a powerful Bull market. Any prudent trend following commodity trading advisor knows they do not know the future and they rely on signals to go long and short. No one knows any more than you.
Actually we have a commodity trading advisor that we have invested with that purchased the Nasdaq back in the spring and has been following this powerful ( bear market rally) trend. More so in all truthfullness this is a trade he does not believe in or like. ..But guess what..it has been nicely profitable and why we have invested with him…is he is disciplined and he manages the risk.
My point is in order to be successful when commodity trading or even trading the stock market index, one must put their opinions in their pocket. Commodity trading advisors rely on their thought out mechanical trading systems. For example we put on a trade selling the SP index several weeks ago. The trade did not work. We sustained a small loss. Again we are looking to sell the Nasdaq at 1520 with a risk to 1580. This is trade is based on the Donchian approach. I have no idea if it will work nor do I care. Another idea could be for one trying to short the stock market index is selling once the daily price closes two days below the 200 day exponential moving average. Using this method one would have avoided all the HUGE LOSSES in the stock market index back in Dec 2007.
Take a look at this chart… Trade with a plan if you want to succeed.
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Futures trading involves risk. People can and do lose money