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NY 6 – Jason McDonald: Why Shorts Are Hard to Find and How You Can Find Great Shorts
Introduction to Short Selling Challenges in a Bull Market
In the world of trading, short selling is often seen as one of the most complex and misunderstood strategies. Jason McDonald, a former hedge fund manager and proprietary trader, sheds light on this topic in his powerful seminar, “NY 6 – Why Shorts Are Hard to Find and How You Can Find Great Shorts,” presented at the ITPM New York Super Conference 2016. Through this session, McDonald explains why finding short opportunities is difficult in a bullish economic environment—and more importantly, how traders can still uncover high-quality short setups using a systematic approach.
Why Finding Good Shorts Is So Difficult
McDonald begins by explaining that in periods of economic expansion, most publicly traded companies tend to post strong earnings due to GDP growth and optimistic market sentiment. This macroeconomic strength lifts a wide range of stocks, making it difficult for traders to identify fundamentally weak companies.
In a thriving economy, negative outliers are less obvious and harder to find. Traders, particularly retail investors, may feel overwhelmed by the abundance of bullish charts and lack of visible downtrends. McDonald stresses that this difficulty is not imaginary—it’s rooted in real market behavior and investor psychology during economic booms.
A Systematic Framework for Finding Short Candidates
One of the core takeaways from McDonald’s seminar is his methodical approach to short selling. Rather than relying on gut feelings or guesswork, he introduces a structured process to help traders uncover opportunities even when most stocks are trending upward.
Key elements of McDonald’s scanning process include:
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Defining precise criteria: Set quantitative filters such as declining earnings, deteriorating fundamentals, or poor sector performance.
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Utilizing screening tools: Use software to scan thousands of stocks for weakness based on technical and fundamental indicators.
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Analyzing outliers: Look beyond the surface of a bullish market to identify stocks that are bucking the trend.
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Ongoing review: Continuously refine your criteria as market conditions shift.
By following this data-driven approach, traders can identify weak stocks with high short potential that others might overlook.
How to Identify Great Short Setups in Strong Markets
While the overall market may be bullish, not every stock follows the same trajectory. McDonald emphasizes that savvy traders can still find profitable short trades by digging deeper into company-specific weaknesses.
Some of the red flags he advises traders to look for include:
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High debt levels that increase vulnerability to cash flow pressures.
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Consistently declining earnings, indicating weakening business fundamentals.
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Loss of market share, which may signal structural problems or increasing competition.
These indicators often point to companies that are out of sync with the broader market, making them prime short candidates even when others are thriving.
Developing the Right Mindset for Short Selling
A major focus of McDonald’s seminar is mindset. He emphasizes that mastering short selling isn’t just about identifying setups—it’s about managing risk and understanding market psychology. Emotional discipline is essential.
Retail traders often fall victim to fear and greed, which can derail a well-constructed trading plan. McDonald encourages traders to build habits that support long-term success:
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Understand how sentiment shapes price action.
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Avoid emotional decision-making.
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Implement strict risk management techniques.
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Remain patient and objective.
These principles are at the heart of McDonald’s educational philosophy and are critical to becoming a proficient short seller.
Final Thoughts: Gaining an Edge in Short Selling
Jason McDonald’s “NY 6 – Why Shorts Are Hard to Find and How You Can Find Great Shorts” offers a masterclass in short-selling strategy, especially in bullish market conditions. His emphasis on scanning tools, technical precision, and trader psychology makes this seminar invaluable for serious traders seeking to diversify their skill sets.
Whether you’re a beginner looking to understand the fundamentals of short selling or an experienced trader aiming to refine your edge, McDonald’s approach provides a clear, actionable roadmap.
