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Steven Dux Short Selling Strategy

Short selling with precision — advanced difficulty

📊 advanced 📍 This strategy is suitable for trading low-float stocks with high demand, particu

Strategy Overview

This strategy involves short selling low-float stocks with high demand, utilizing a statistics-first mindset and dollar block concept to predict reversals. It consists of three main strategies: Gap Up Short, Bounce Short, and First Red Day, each with its own set of rules and filters. By applying these strategies, traders can potentially capitalize on the predictable reversal of stocks after a significant run-up in price.

Market Context — When This Strategy Works

This strategy is suitable for trading low-float stocks with high demand, particularly in the micro-cap and small-cap markets. It is most effective during regular trading sessions, and traders should be cautious of pre-market volume and sector-specific risks.

Core Philosophy and Framework

The strategy is built on supply and demand mechanics, quantified human psychology, and a statistics-first mindset. It involves tracking every qualifying setup manually to determine frequency, win rate, and average fade percentage, allowing for the pre-calculation of expected annual P&L and the elimination of emotional FOMO.

Supply and demand mechanics
Statistics-first mindset
Dollar block concept

Universal Pre-Trade Filters

These filters are hard rules that must be applied before evaluating any setup. They include market cap, float, share price, and sector-specific filters to ensure that only suitable stocks are considered for trading.

Market cap filter
Float filter
Share price filter
Sector-specific filters

Strategy 1: Gap Up Short

This strategy involves shorting a stock that has gapped up over 100% from the prior close, after a brief post-open consolidation. The logic is that low-float stocks gap on thin pre-market volume, and once the regular session opens, selling pressure overwhelms limited buy-side interest.

Gap up over 100% from prior close
Post-open consolidation
Limited buy-side interest

Strategy 2: Bounce Short

This strategy involves shorting a stock that has spiked months ago and then collapsed, leaving a large pool of holders trapped near the prior high. When the stock gaps up again toward the old high, those trapped holders rush to sell, creating immediate selling pressure.

Prior spike and collapse
Trapped holders
Selling pressure

Strategy 3: First Red Day

This strategy involves shorting a stock on the first red daily candle after a qualifying multi-day parabolic run. The edge comes exclusively from precise timing using the dollar block concept, which predicts when retail capital will be exhausted.

Multi-day parabolic run
First red daily candle
Dollar block concept

Entry Rules

Apply all universal pre-trade filters
Identify the specific strategy (Gap Up Short, Bounce Short, or First Red Day)
Wait for the consolidation phase (Gap Up Short) or the trapped holders to sell (Bounce Short)
Enter a partial position when weakness begins
Add to full position when the breakdown is confirmed
Use volume confirmation to validate the setup

Exit Rules

Take profit at 20-26% fade from the intraday high (Gap Up Short)
Cover at or near the close for full position
For large positions, cover in tranches on the way down to avoid market impact
Monitor volume and adjust position size accordingly

Risk Management

Set stop loss above the consolidation high (Gap Up Short)
Do not exceed 10% of the float in total share size
Do not exceed 1% of estimated daily volume in total share size
Use risk-reward ratio of approximately 1:3.5

Key ICT Concepts Used

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