Down Traders: The Only Guide You Will Ever Need to Make Money on Stocks That Go Down
By Jeffrey S. Kopitz
Langdon Street Press
$24.95;190 pages
This is a well-written, beautifully-illustrated introductory book on shorting the market based mostly on using technical analysis and candlestick charting. While the book’s logical and easy-to-read format, clear writing style and numerous color charts are first-rate, its contents will probably not be eye-opening or new to existing or advanced traders. However, newbies will definitely benefit from the material covered.
The author begins with a basic explanation of how the stock market works and what vehicles are available, followed by the order types, market hours, office set-up, broker selection and a trading system checklist. He provides an excellent example of the checklist components. Additionally, he covers the five emotional enemies of traders.
Kopitz recommends 10 trading vehicles for shorting including the three major indexes, the inverse index and leveraged ETFs, high-beta stocks, FOREX pairs, commodities, and last gold, real estate, and country ETFs. Next, he reviews ways to short using put options on indexes, stocks and ETFs. Although the author provides a useful short selling trigger list, he includes the RSI (relative strength index) and OBV (on-balance volume) indicators which are not explained until later chapters.
While Kopitz offers a brief chapter on fundamental analysis, he favors technical analysis and devotes two chapters to the subject. He provides a short description of 10 well-known technical indicators (e.g., volume, simple moving averages, OBV, MACD, RSI, Commodity Channel Index and Stochastics), and then briefly covers support and resistance, trend lines, gaps and trigger points.
He suggests that readers select five of the 10 indicators that they prefer after working with them for a while. However, he doesn’t specify which ones may overlap with similar signals. Although Kopitz does mention Fibonacci numbers, he does not provide a charting example. The author spends considerable space (33 pages) on the most popular candlestick formations followed by candlestick reversal patterns with chart examples.
Also included is a chapter on using options, their basic elements and a few strategies, one of which is a detailed look at handling a straddle. He then reviews 10 options trading tips. This is followed by guidance on handling risk management with stops using limits, moving averages and average true range.
Kopitz recommends that a trading journal be kept and he offers a spreadsheet download to readers from his website. Unfortunately when I tried to download the spreadsheet it did not appear. Moreover, there was no email address or contact information on his website to contact the author for clarification or more information.
Overall, Kopitz provides a useful guide to shorting the market and ties all his points together in a 13-page Appendix labeled “Quick Start Guide” that is also downloadable from the author’s website. One shortcoming is the lack of a bibliography for further study. (For more detailed information on short selling, I recommend Alexander Elder’s books). In summary, this is a good introduction to shorting the market, but certainly much more study will be required than provided here before you become a successful short seller.
Leslie N. Masonson is the author of Buy DON’T Hold and All About Market Timing, (Second Edition). Reach him at lesmasonson@yahoo.com