In the **Screener**, choose **"Signal" = Top Gainers** to filter for stocks that have risen the most.
💡 **Pro Tip:** These are the stocks that have gone up quickly in price. We’re looking for ones that might start dropping soon!
Step 3: Use RSI to Find Overbought Stocks
Set **RSI (14)** to **Overbought (70)** to find stocks that are likely to fall.
What is RSI?
💡 **RSI** (Relative Strength Index) tells us if a stock is overbought or oversold:
If **RSI is over 70**: the stock is overbought and might start falling.
If **RSI is under 30**: the stock is oversold and might rise soon.
Since we’re shorting, we want **overbought** stocks because they’re more likely to drop.
Step 4: Identify Resistance Levels
Choose a stock that keeps hitting a **resistance level**. Here's how to find it:
Look at the stock’s **chart** on Finviz.
If the stock price touches a certain level multiple times but **can't go higher**, that’s the **resistance level**.
Short the stock when it fails to break resistance!
In this example, the stock hit $50 multiple times and dropped. The $50 level acts like a "brick wall," blocking the stock from going higher!
Step 5: Place the Short Trade
Short the stock when it starts falling from the resistance point.
Step 6: Set Stop Loss and Target
Set a **Stop Loss** just above the resistance level and aim for a 1-2% price drop as your target.
What is a Stop Loss?
💡 **Stop Loss**: This is an order you place to automatically close your trade if the stock price goes against you. It helps protect you from losing too much money.
If you short a stock at $49 and set your **Stop Loss** at $51, your trade will automatically close if the price reaches $51, limiting your losses.
Explanation:
You **short at $49** (selling borrowed shares), expecting the price to fall.
But if the stock rises to $51, your **Stop Loss** will trigger, and you’ll buy back the stock at **$51**, taking a **$2 loss per share**.
For example, if you shorted 10 shares, your total loss would be $2 × 10 = **$20**.
Note: A **Stop Loss** protects you from losing more as the stock rises further. Without it, your losses could be unlimited if the stock price keeps rising.
Example:
🎯 **Example Trade:** The stock hits $50 several times but can’t go higher. You short the stock at $49, set your **Stop Loss** at $51, and aim for $48 as your profit target!