Seems to me that with your long and short stock selection you are already "hedging" and "minimising risk" and I don't see that you can go further than that. You are reliant on the overall net result (ie: the profits on your long trades outstrip the losses on your short trades and vice versa) as your base expectation, with the occasional bonus of some coming good on both sides.
To maximise that net result I guess you will be looking for the stocks in the strongest uptrend (since they will tend to rise faster when the market rises and fall slower when it falls) and vice versa for shorts. When the market is in a strong trend I'd be surprised if you found an equal number of candidates on both sides.
It's usually dangerous to go against market trend - when the water rises all boats float - and I usually only go half position with my equities if I do.
Thank you very much. Let me add to my strategy.
With help of
FINVIZ.com - Stock Screener, stockcharts, macd histogram, candle, volume, and stoch., I come-up with the list of Long candidates from Uptrend and Short from Uptrend. As I go through this exercise, I end-up with a certain number of longs and shorts.
After this stage I need help. I have few options.
1. Use number of Long and Short as an indicator of next day's(ususally Monday's)
market sentiment.As an example, if my process gives me 10 longs and only 4 shorts than most probably market should have bullish bias. So instead of using any other calculations, I enter all my longs and shorts with dollar equal amount of Long and Short, which is $5000 each since my total capital is $10K(but I do not allocate more than $1000 per equity) and I do not want to use margin yet.
I have done this and I did not loose but did not make any either.
2. So I changed my strategy and now in the morning, at @ 7AM ET, if '5-minute' glance at
Yahoo! says that market will open higher than as you have mentioned, I enter only Long positions with 50%($5000) of total capital and vice versa. If open trend seems neutral, than I execute all of my Long and Short trades.
I exit with signals from MACD hist., candles, volume, previous two day's volume confirmed high/low, or my maximum loss limit of 3% of allocation per that equity. If my position is about 3-4% profitable, than I keep 2% trailing-stop loss limit and do not do any of the technical analysis to exit.
If my all $10,000 are in than my potential risk is $300. As of today I am $100 down after trading about 80-90 stocks with close to 50% loosing trade, but most of my profits came from Short not Long even though market was going up from month to month. This may indicates that my strategy is giving positive bias on short side and I should make 60% short and 40% long as my bench mark and than make adjustments based on that days market.
At this stage, I have ran out of ideas to fine tune. I am even thinking about options or futures, but my thought is, if I can not make this work than how it is going to work with other system.
Honestly, I do not know how to move forward and make some money. So please show me what I am missing.
Again, thanks to all of you for sharing your time and expertise for free. This is called 'priceless' - too valuable to price or at least I can not afford to buy it at this time.
God bless you all.
Unid
