I am a short biased trader. I prefer shorting 99% of the time.
I feel most comfortable shorting early in anticipation of an eventual move to the downside.
This is called shorting the front side.
You have to be extremely disciplined at not add, add, adding size too early, because it’s the front side. The stock can keep going.
Why do I start early? It’s what I have become accustomed to after thousands of trades. It has become natural for me. I need to be in the trade so I can feel the move better.
But I don’t start with size.
And I don’t add size until the trend breaks down (usually temporarily on front side moves).
I start with what I call micro entry trades.
If you look at the chart above you’ll see some red dots (short entries).
Those first entries to the far left are literally 2 shares, 5 shares. The second set of entries are 50 share entries, several of them overlap.
The green dots are covers on the flush move, almost a $9 drop from the larger entries. I scale out of the position near those whole and half dollars, and significant flushes.
Covered, all out. You have to cover flushes on the front side.
My position was about 700 shares in this trade example. About 1/5th full size given what I felt could have been a big opportunity if the reversal stayed heavy, but I never anticipate that, I assume it will hold and get out…because I can always get back in.
We are still on the front side of the move, by a long shot. I never want to be a hero. I want to get a piece of the action, and move on and wait for more opportunities.
As you can see, it was the right call. The stock retraced from my exits (367s) to a high of 395 later that day.
So micro entry trades are very very tiny size. The least is 1 share. At most 10 or 15 shares depending on what I think my full size and the range of the opportunity I think is a probability. But I also factor in how much I am willing to risk.
If my full micro entry trade is about 25-30 shares and I am $10 too early, I would cut the trade completely, take my loss and move on, or wait for the right setup to come later.
I do not hold on nor do I add to those shares because I am already wrong.
The micro entry trade is specifically for avoiding big losses on a trade. Because 99% of my trades are short and on the front side, I am almost always beginning my trades like this.
It allows me to scale into the trade, but that habit has also allowed me to get better at scaling out of a trade, leaving shares on as long as possible to capture more range on the reversals.
It doesn’t matter whether you short, long, or both. Starting small with a fraction of the size you are comfortable with or plan to trade with is a no brainer in my opinion.
Remember, I trade as if I am wrong on my entry, without a bias, simply focused on my plan and executing it in accordance with my rule framework. I don’t mind being wrong, but I certainly don’t stay wrong either.
I move on.
Trading smaller can still bring plenty of consistent profits. Every now and then you get an A+++ opportunity and you take on more size than usual and those trades/days, in my experience, can make up 80% of your month or year.
Most days it’s micro entries, looking for opportunities, playing defense, keeping losses small, scaling into and then out of trades when you are on the right side.
Remember small entries (that you do not add to when you are wrong) can keep you from big losses.