RealTest Parabolic Short Selling Strategy

Qullamaggie Breakdown Framework

This strategy is based on the parabolic short-selling framework popularized by Kristjan Kullamägi. It identifies stocks that have extended into unsustainable parabolic moves, characterized by accelerating price increase on expanding volume, and enters short after the momentum structure breaks. The entry waits for confirmation of the breakdown rather than attempting to pick the top.

Short-Side Risk Management

Short selling carries asymmetric risk since losses are theoretically unlimited. This strategy mitigates that risk by filtering for liquid, higher-priced stocks where short squeezes and manipulation are less likely. It avoids low-float and micro-cap names. Position sizing is defined in the code and can be adjusted. All backtests include borrowing costs and realistic Interactive Brokers commissions.

Portfolio Hedge Application

A short-selling strategy with low or negative correlation to long equity exposure functions as a portfolio hedge. It tends to generate returns during the late stages of speculative runs and during subsequent corrections, when long-only portfolios typically experience drawdowns. Including a short-side component can reduce the overall portfolio drawdown profile. The complete RealTest source code is included for inspection and modification.