A systematic short-selling approach that profits from declining stocks by identifying securities showing the weakest technical characteristics.
This page explains our short weakness strategy framework. You'll learn about the scoring system that identifies weak stocks, the optimized parameters for position sizing and risk management, how trades are executed, and why certain price ranges work best for shorting.
The Saturn strategy identifies stocks exhibiting bearish characteristics and profits when their prices decline. Unlike long strategies which buy strength, this strategy sells weakness - shorting stocks with poor momentum, bearish technical patterns, and underperformance relative to the market.
Through extensive optimization testing over thousands of parameter combinations, we discovered that a specific price range produces dramatically better risk-adjusted returns than wider ranges. This isn't arbitrary - there are fundamental reasons why.
Short selling has theoretically unlimited downside - a stock can rally infinitely. The strategy employs a protective stop-loss to guard against catastrophic losses from short squeezes or unexpected positive news.
When a shorted stock rallies beyond the stop threshold from our entry price, we immediately cover the position at market price, regardless of whether it still shows weakness signals.
All trading signals are generated at market close (Day T) and executed at the next day's open (Day T+1). This ensures realistic backtesting without look-ahead bias.
After market close, calculate weakness scores for all stocks. Rank qualifying stocks and determine which positions to open or close.
At market open, execute the signals from the previous day. Covers are executed first, then new short positions are opened in equal weight.
Unlike the momentum strategies which use score-weighted allocation, Saturn uses equal-weight positions. Each short position receives an equal share of capital, reducing the impact of any single stock.
Short selling involves significant risks including unlimited loss potential. All performance figures are based on historical backtesting and are hypothetical. Past performance does not guarantee future results.
The backtest assumes perfect execution at open prices with no slippage and assumes shares are always available to borrow. Real-world short selling may involve borrowing fees, margin requirements, and forced buy-ins. This is educational content, not investment advice.