Cycling Shares

Share cycling is an averaging technique used to risk adjust a position over time. In long positions, cycling shares involves deleveraging on pumps and leveraging only on pullbacks. In short positions, cycling shares involves the opposite actions.

Short Trade Example

I shorted the above example. I entered at ‘1’ and exited full position at ‘2’. My reasoning was bullish price action. I re-entered at ‘3’, deleveraged at ‘4’ due to fast bullish momentum, re-leveraged at ‘5’, exited full position at ‘6’, re-entered at ‘7’, and finalized profits at ‘8’. In this example, I exited and entered my full position many times due to abnormally fast price movement, which isn’t viewable on this chart. I typically only exit part of a position and re-leverage heavier as the position moves against me to cycle the shares. I also cycle the shares down and exit small portions of my position as the trade is moving in my favor, which reduces risk. In the example, risk was averted at ‘2’, ‘4’, and ‘6’ and profit taking at ‘6′ and ‘8’ more than made up for any intra-day losses incurred during this trade.

Share cycling involves exiting shares when things are working out and entering shares when things are moving against your position. This averaging method is used to achieve a well risk adjusted position.

Leave a Reply


%d bloggers like this: