Disregard my last sentence above. I did include the suggested beta-adjusted position size in the trade parameters for this trade. (beta-adjusted position size of 1.0)

I see your point. However, note that on the first sentence of this post I had stated: QQQ (Nasdaq 100 Tracking ETF) offers an objective, yet aggressive entry on today’s breakout back above the 200-day EMA & this secondary uptrend line…”

By “secondary uptrend line”, I was referring to the fact that this is not the TL that I put the highest weighting on. For months I have been highlighting the trendline that was generated off the Aug ’15 lows, which also picks up the early 2016 lows. That is the most significant TL on QQQ, IMO, and I’ve also highlighted that many of the other major stock indices as well as many sectors also have very well-defined uptrend lines off the early 2016 lows.

Either way, both of those TL’s come in very close together right now but the primary TL off the 2015 & 2016 lows comes in just slightly above. One thing that I talk about often is that if I have two different trendlines and/or price support/resistance levels that come in very close together, I give the benefit of the doubt to the last (or first) of those two nearby support levels. What I mean by that would be if I am looking to go long on a stock that has set up in a bullish technical posture or pattern and I have a downtrend line just above but a decent horizontal price resistance level slightly above that trendline, I will hold off on going long when the stock breaks out above the trendline, instead waiting for a break above the resistance level just above that in case the stock fails to take out the resistance.

When shorting, like with this trade, that would be in reverse. While QQQ may very well continue up to test that primary uptrend line, which I consider more significant, if enough eyes are watching the TL I used on the chart above, it is quite possible that the sellers step in here on this backtest & that marks the end of the run for QQQ. In other words, I’m not going to hold out for another mere percent or two & risk what could possibly prove to be a very objective & timely short entry if QQQ reverses off that secondary, more minor TL. 4-yr chart with that primary TL below:

The 2-3% risk is the rough loss if the trade is stopped out on a daily close above 178.72. The exactly stop level, should QQQ close above that price before the final target is hit, is unknown but let’s say that QQQ closes at 179.00. That would a 2.28% loss (179-175/175=0.0228).

In your example*, a $100,000 position in QQQ would result in a loss of $2,280 assuming the trade was stopped out at 179.00 or a gain of 12.8% (175-152.55/175) or $12,828 if the final target is hit.

*Not sure if you meant to phrase it that way but assuming that one had a trading account with a $100,000 balance, shorting $100,000 of QQQ would be extremely risky & go against all rules of diversification & proper position sizing. While everyone is different, typically one shouldn’t put much more than 10% of their portfolio in any one position although that rough rule varies widely depending on what that position is and how correlated the other positions in the portfolio are.

e.g- Putting 20% of one’s portfolio or trading account, which market conditions & the charts warranty it, into SPY might be fine as although SPY is a single security, it is simply a fund that holds nearly 500 different stocks within 11 different sectors… a lot of diversification. On the flip side, putting 20% of one’s account in a small biotech company or a marijuana stock would be considered an extremely aggressive & wreckless move.

On a related note, I forget to list the suggested beta-adjusted position size for this trade which is 1.0 (i.e.- a typical position size which, once again, varies with each individual trader but probably wouldn’t account for much more than 10% of one’s total portfolio value).

This was an official entry (active trade) at the current price although I had stated that entry as being an aggressive entry with another option (a more conventional entry) “to either take a partial starter position here (or hold off on taking a position right now) and wait until both QQQ & SPY close back down below their 200-day EMAs, either on a daily basis or even better on a weekly closing basis. If so, that would provide another objective add-on or new short entry.”

Counter-trend trades are aggressive and even more aggressive without any sell signals. However, I factor in the R/R & other variables & the way I see this one is the short entry yesterday has minimal downside (loss) if stopped out relative to the gain potential. Another consideration is that if I were to wait for some type of high-probability sell signal from a reversal & decent drop in QQQ that tells us (in hindsight) that the recent rally was most likely just a counter-trend bounce, at that point we would be looking at a much less favorable entry price, maybe 5% or below yesterday’s entry price of 175.00.

The reason that I considered yesterday’s entry aggressive was due to the fact that I was shorting QQQ on one of the strongest single-day rallies in years & during a near-term (off the Oct 29th lows) to boot. However, waiting to re-short QQQ once it had bounced back into my expected bounce target range was my plan back on Oct 29th when I closed the previous QQQ short trade out early & as such, I am simply sticking with my plan as the outlook & technicals for the market has not changed since then.

1.) risk losing $2000 – $3000 lon this trade if QQQ goes above 178.78.
2.) Taking a short position on QQQ that amounts to about $2000 – $3000

Moved stop up to 7199 just to give a little room.

Might be a little too early, but costs me little to try.