Not much has changed on the leader board.
The SMT stock portfolio has completely recovered from the recent premature entry and is currently +27%.
The January results highlight why it’s hard to make money on the short side. The top three challengers made most of their money by shorting. 2018 was a very good year to short if you timed it correctly. However what very often happens is that traders hold onto their shorts too long and end up getting caught in a short squeeze when the bottom arrives sooner than they were anticipating. Emotions kick in and traders want to keep making easy money shorting. So they push the trade too long and end up fighting the advancing phase of a new intermediate cycle. This is how shorts often end up giving back all, or most of the profits they made on the way down.
It’s sexy to play both sides of the market, but the human trait towards recency bias means it rarely works out to sustainable gains in the long run.
I’ve said this many times in the past. It’s tough to make money on the short side, and more importantly, keep it. Markets go down differently than they go up. If you don’t time bottoms almost perfectly the odds are over the long term you will end up losing more money shorting than you make.
