“Don’t short new highs or buy new lows”

“Don’t sell/short new highs or buy new lows” is stock market advice that some follow and others do not. Many stock market analysts believe that it’s not possible to call the top or the bottom of the market—and that it can always go higher or lower. “You don’t want to short new highs” has been cited in print since at least 1998.
 
“Buy new lows and short new highs” was cited in print in 2006. “Consider the ancient aphorism, ‘Don’t short new highs or buy new lows’” was cited in 2014.
 
     
Google Groups: misc.invest.stocks
Buy On Weakness, Sell On Strength
RJ Ratchford
6/5/98
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  Buy On Weakness, Sell On Strength
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by Rick J. Ratchford
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If a market is making new highs, I’m not saying you should start shorting it. Although the commercials may start to do so more and more as we go higher and higher, they have the resources, most of us do not.  It is not very wise to try and short the very top if that top is higher than all the previous tops.  In other words, you don’t want to short new highs.
 
Wall Street Bear Discussion Board
Re: All I can say is NEVER short new highs. With time you will learn why.
joedumars - Mon, Mar 24, 2003 - 10:07 AM
why? i have gotten burn before but curious what your rationale is.
 
Wall Street Bear Discussion Board
Sorry hit the enter key by mistake…I was saying as a bear my rule #1 is don’t short new highs….so I guess you could massage this rule
MplsBear - Tue, Nov 18, 2003 - 02:30 PM
and also make it read “Don’t sell new highs.” At this point you sold “hoping” that it doesn’t run away from you just like someone who shorts a new high and is hoping it doesnt’ go against them. Hope is usually not the best thing to use for obtaining profits in the market. All IMO.
     
EliteTrader Forums
illiquid
Feb 19th, 2004, 11:05 PM
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But let’s stop trying to convince the world that your way to trade is the only way; “don’t short new highs cuz it’s scary when it goes higher” is pretty ridiculous advice when it comes to trading, every trade has the risk of loss and that’s the name of the game. You can try shorting after the turn but you can never be sure if that is THE turn, no matter what trendline or tape-reading methods you use, and you will lose far more when that specialist or whatever market forces rip it higher once again compared to those who managed to catch the temporary top.
 
TraderMike.net
Posted by Michael on June 19, 2005 at 9:50 pm
Architect,
The buying at new highs thing could be taken to mean buying at or near new highs — not necessarily buying a breakout to new highs. I’d consider buying a pullback from a new high, with the expectation of the stock making more new highs to be ‘buying new highs’. The key to me is recognizing the trend and not doing what a lot of people do and sell new highs and buy new lows.
 
Google Books
Entries and Exits:
Visits to Sixteen Trading Rooms
By Alexander Elder
Hoboken, NJ: John Wiley & Sons, Inc.
2006
Pg. ?:
Pros are more likely to fade breakouts—trade against them. I often say to my students, only partly tongue-in-cheek: “Buy new lows and short new highs.” You cannot do this automatically without thinking, but when you see an upside breakout, it pays to look for evidence of weakness and s shorting opportunity. When you see a downside breakout, it is important not to overlook the evidence of strength, a buying opportunity.
 
TradingMarkets
TradingMarkets 10 Trading Rules: #1 Buy New Lows, Not New Highs!
October 6, 2008 By David Penn
 
Twitter
Dan Emmons
‏@CoderTrader
One thing I’ve learned by losing a lot of money is you don’t buy brand new lows in oil. $cl_f and you don’t short new highs. You sit & wait
10:04 AM - 4 Mar 2013
 
Zero Hedge
“Stuff Traders Have Told Me”
Submitted by Tyler Durden on 05/14/2014 17:49 -0400
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Via ConvergEx’s Nick Colas,
 
Consider the ancient aphorism, “Don’t short new highs or buy new lows”.  If you ignored that one in recent days, you missed the new highs in the Dow and S&P 500.
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Take, as an example, the old trader’s rule: “You don’t short new highs, and you don’t buy new lows.”  As an analyst, this one always infuriated me.  At the same time it has the odor of ancient wisdom about it, like the basement of an old beach house.  The chance that you possess the marginal information to catch a stock at an inflection point is essentially zero.  Traders know that; analysts tend to forget it.  You wait for the price action to stabilize before you take a position, for this means the market has truly absorbed the marginal investor’s point of view.  Then, and only then, is it time to take the alternative stance.
 
Twitter
Trade Smart Online
‏@TradeSmartOnlin
#TradeSmart: The old trader’s rule: “You don’t short new highs, and you don’t buy new lows.
3:25 AM - 15 May 2014