Trading Bias - Do You Do Better Long or Short?
February 14, 2008
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John Forman - The Essentials of Trading author
Do you find that you trade better short than long? Or maybe you trade more profitably long than short. Of course, if you’re a long-only stock trader then this isn’t something which will concern you at all, but for those who trade both ways it can be something interesting to observe.
In many cases one’s early trading exposure can imprint them with a bias one way or another. By that I mean if you’re first big winning trade was short, for example, it might stamp you with a natural inclination toward shorting. Now this isn’t to say that you are necessarily a better short side trader because of that. It’s just a bias.
That bias (long or short) could, however, be something which leads to better trade in that direction. Maybe it encourages you to focus more closely on set-ups in that direction.
Alternately, it could be that your first imprint has nothing at all to do with your trading better in one direction than the other. It might just be that the way you trade tends to lend itself better to a certain type of trading. Bear markets tend to move sharply while bull markets tend to grind a bit more (especially outside forex). Your personality traits and/or the analytic focus which enters into your trading methodology could mesh better with one or the other. Hopefully you can see how it would be worth knowing that.
For myself, I will admit to being heavily influenced by the Crash of ‘87. I wasn’t an active trader yet, but the action of the markets really left an impression on me. That was more a question of getting a major insight into how emotional the market can be and the extremes that sort of thing can take prices to when it happens. I don’t fell I necessarily do better consistently long or short. I’ve certainly had my successes both ways. If there is a split, I suspect that I do better shorting in the short-term and buying the long-term.
How about you? Do you feel more comfortable trading short or trading long?
Here are some other posts which might interest you:
I expect this should be both timeframe and market dependent. In markets that have a pronounced upward bias over time, the longer the timeframe of the trader, the more sense it makes for them to have a pronounced long bias in their methodology. It’s a tough row to how, being a short-biased trader, if your holding times are measured in months. Very few of those boys outperform buy+hold strategies over a period of years.
Bill - I totally agree if you’re speaking in terms of stocks, but I also trade forex and other markets which just as readily go down as up. Even in those cases I believe I have more frequently been long my position trades than short them. Since I did come up through equities, no doubt that rubbed off and is part of my bias in that regard.
I do enjoy playing the short side in the market, though. Things happen very quickly!
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