Unlock Massive Profits with Parabolic Shorts: 6 Essential Nuances

Marios Stamatoudis
Marios Stamatoudis

Marios Stamatoudis is a swing trader and top performer in the 2023 US Investing Championship, with a 291% return. He focuses on momentum and high-growth opportunities.

January 24, 2025
3 min read
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1. Catching the “Top” in Parabolic Shorts

Catching the “top” is one of the hardest things to do in the market, so you must approach this setup carefully. The criteria for this setup should be strict enough for these occurrences to be somewhat “rare.” For me, I might encounter a great setup once a month.

Parabolic Shorts
Parabolic Shorts

2. There is Always the Potential for a “Lag Effect” from the Move

There is always the potential for a “lag effect” from the move. When my setup criteria are fulfilled, I allow a 1 to 2-day window for attempts. If it doesn’t work out, I skip the setup altogether. It’s easy to become obsessed and “mentally triggered” by these.

3. Setting Mental Price Targets on the Downside

When shorting, as opposed to going long, I always set a mental price target on the downside. These targets depend on my “expectancy” regarding the power of the move. Large cap stocks tend to have lower expectancy on big exhaustion days (e.g., 10-15%), while smaller names have significantly higher expectancy. Expectancy depends on the prior upside % move as well.

4. Strategic Position Management for Parabolic Shorts

If the stock reaches my expectancy target on day one, I usually cover everything. If it does not, I typically give it a maximum of 1 to 2 more days to reach that expectancy, but with a smaller position overnight. I can always add on the second day if the expectancy is not reached on the first day. There is always a chance of a major percentage gap up, so a large position overnight is a no-go for me.

5. Exercising Patience at Market Open

In the first few minutes after the market opens, I am very patient. I prefer to miss a move rather than get chopped up to the upside by many rapid FOMO attempts.

6. Scaling Into Trades

I usually scale into these trades, looking for signs of intraday exhaustion for my first entry and pullbacks later in the move for adding. Halts occur more frequently in these types of setups, so taking a large position right away has burned me in the past. That is why I prefer to gradually scale in.

Frequently asked questions

Catching the top of a parabolic move is tough because momentum can push prices higher than expected before reversing. Stocks in a strong uptrend often trap early shorts before rolling over. That’s why I use strict criteria and wait for clear exhaustion signals—good setups might only appear once a month.

I set mental price targets based on the stock’s prior upside move. Large-cap stocks usually have a lower downside expectancy (10-15% pullbacks), while smaller stocks can drop much more. Understanding this helps me decide whether to hold or cover my position.

Scaling in helps manage risk, especially in volatile setups. Parabolic stocks often experience trading halts, and taking a big position right away can be dangerous. I enter my first position on intraday exhaustion signs, then add on pullbacks if the setup confirms.

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