More on the Money Spinner!
Having outlined the main features of the Money Spinner, and having stated that perhaps more subtle information may be extracted from it I have started to read the rest of the manual again, and tried to find items that may not immediately be obvious from the basic stepwise procedure for finding Next Trade Prices. Indeed there are some remarks that are made by Chakrapani that are not immediately obvious from the basic procedures. These are, for now. . .take note, this text is mine. It is an interpretation of the Charkrapani advice:
1 Stick with low priced stocks initially. Although this recommendation is a bit fuzzy. . .AIMer Toofuzzy would love this
. . . part of the reason is obvious and is true for AIM and VORTEX: Low value shares have. . .especially penny-valued shares. . . a much greater relative price movement than high value shares, if they do move! A share costing 1 penny going to 2 penny represents a 100% relative increase. A share costing $100 moving $ 10 moves only 10% relative value and if the Hold Zone would be set at 11 % AIM nor VORTEX would advise trading. . .This is a general issue in regards to the Volatility Preference when AIMing. Chakrapani adds to this on Page 54:
"Unless you have a lot of money to begin with, high-priced stocks are much less suitable for the Money Spinner Program compared to low-priced stocks".
This appears to state that if you have a lot of money to start with volatility is no longer a preferable feature for a stock to work just as well with the Money Spinner as volatility would do for an investor with only a little money as Start Capital. I think I know what Chakrapani meant. . .but he did not explain it here. In regards to this it is certainly true that dynamic investing with large trading volumes is burdened with much lower trading costs than low volume trading. I know that for example if I buy € 10 worth of shares here in Holland it will cost me € 10 on trading fees. . .unless I buy House Fund Participations from my bank. . . then the minimum I could buy is € 50 worth and that would cost me about 50 or 60 cents! In that sense Chakrapani is correct. . .but could it be that he means something else altogether? . . .Perhaps, would the Money Spinner work very different when large amounts are traded? If so, then I will find it IF it is explained someplace in the Manual.
2 Chakrapani's example was to start with a Share Price(SP)of 5 and the quantity of shares 1000----> Initial Equity = 5000.
Suppose now an investor has a lot more money available and wants to start with 3 or 4 times as much. . .Does the Money Spinner then simply turn out 3 or 4 times the Results? Essentially the important thing here is this: "Would you make more profit proportionally to a larger Starting Capital". . .Perhaps this is the clue to the unexplained issue in (1) above.
Chakrapani answers this with: No! and on Page 83-84 he goes into that issue in more detail:
A SPECIAL NOTE TO THOSE WHO WANT TO START WITH A LARGE NUMBER OF SHARES
Suppose one starts with 3000 shares at the price of 5, @ 50% CER the total Start Capital is then already 30000 instead of 10000. But why would that make any difference? Consider the AIM and Vortex Trade Advice Generators receptively for a particular Holding Zone:
AIM Trade =(PC-V)-x*V. . . . x is the SAFE
Vortex Trade =(PC-V)*M . . . M is a Multiplication Factor
If x=0 and M=1 then both AIM and Vortex are Ratio Systems. So, if you increases the initial investment Y-fold relative to a Small Start-up then after an up-down cycle with a Sell in it, the Profit for that cycle is also Y-fold relative to the Small Start-up. . .if trading costs are disregarded for now. Chakrapani states this about that:
“The main problem here is that your MSI (Minimum Sell Interval) and MBI (Minimum Buy Interval) could be so small that a but or sell order could be triggered when it is not really profitable. To avoid this we suggest you do the following (when you initial number of shares exceed 1000)”
Here I summarise that advice in short*:
3 Round up the number of shares from what you intended to buy to start with to the next 1000-multiple. . for example 2500-------> 3000 and so on;
4 For the fowling trades buy or sell no less than 1/10 th of the starting share quantity (in this example 300). . . .Set up the MSI and the MBI accordingly as instructed before;
5 In the required stepwise calculations for calculating the MSI and the MBI, as well as calculations for the Number of shares to buy or sell, after a Buy or Sell has been executed, substitute the number of shares that was 100 in the Instructions with the 300 as in (4) above. . .should you have started your Money Spinner with 5000 shares and Total Capital of 50000 instead of 10000, then use 500 shares in these calculations. . . .This procedure is said to be particularly critical when trading penny stocks.
· Charkrapani did not explain, up to this point, what to do if one selects to trade stock that are say $ 100/share or more. Possibly other than the fact that these high priced stocks would trigger trades rather less frequently because of the normally lower percentage price changes no other changes are required. These recommendations here appear to be only for share quantities greater that 1000.
· The last remark for this procedure being especially critical for penny stocks is not explained. I wonder why that is. Maybe it is for the reason that when starts trading high value stocks in great quantities the Money Spinner mechanism is no longer relevant as other financial criteria for professional trading are more important than those that are meant for Amateur Investors.
In conclusion, this additional information at least demonstrates that the Money Spinner is certainly not a Ratio System like Vortex is. . .It appears to be highly non-linear in regards to both share price level and share quantity magnitude. This would make it rather difficult to change the Money Spinner into an Automatic Investment Manager that can be applied to stocks at any arbitrary share price and arbitrary trade volumes.
To which extend the Money Spinner is comparable to AIM is rather less obvious to me, as for AIM when the SAFE x is not zero, it deviates from the Ratio System Principle in the sense that it's Buy & Sell Magnitudes are reduced in proportion to the Safe Value x. . . The Lichello Brake. . .It would appear however that the Money Spinner does this with the principle of these Algorithms in which N1 is the initial number of shares that are bought with 50% of the Total Capital:
A) Calculating (+/-)0,1*N (+/-) 100 shares for finding the next Trade Price for cases in which is started with N1<=1000 shares.
and
B) Calculating (+/-)0,1*N (+/-) N1/10 shares for finding the next Trade Price for cases in which is started with N1 > 1000 shares and using for N1 multiples of 1000 shares.
Let's call that The Chakrapani Brake
It would appear from this that the Chakrapani Brake is a much stronger Brake than the AIM Brake.
6 An interesting question remains: If one would want to start with s CER other than 50/50. . let's assume 80% Cash. . .how would this effect the Money Spinner?
From what I have seen so far it would possibly have a negative effect in the outcome because if one would start out with 10000 Capital and a Price of $5 the Initial Equity and PC would be only 2000 N1 would be 400 instead of 1000, and the next buy Price would the be calculated as follows:
i Shares owned =400
ii Add 10% = 440
iii Add 100 Shares-----> B= 540
Buying Price = PC/B = 2000/540 = 3.70
MBI = 5 - 3.70 = 1.30 This compared to 0.83 is very different.
It would translate to Hold Zone 1 = 26 %
The Buy Order would be 100*3.70 = 370 as compares to 417 before
It could be that at the next buy price of 3.7-1.3 = 2.4 the Buy would be large enough so that everything would come out OK. Lets try':
PC2 = 2000 + 370/2 = 2185
A=2185/2.40 = 910
N2= 400 + 100 = 500
N2+10% = B = 550
To Buy @ 2,4 = A - B = 910 - 550 = 360 compares to ~ 390 before!
And the Buy = 360*2.40 = 864 as compared to 1203 before. Thus with this approach the Reserve of 8000 is not well used at that low price and the with the MBI of 1.3 one would have to wait far longer than if one had started with 1000 shares to the next price of 2.4-1.3 = 1.1. . .which is a 54% drop from 2.4 and 78% drop from 5.
Obviously this is NOT a reasonable approach. . .Unless one uses Ocrofts Up-trend Method
I would suspect that maybe instead of adding 100 shares in the calculation one might instead try to add 1/10 of the shares, just like is done for the case with N1 > 1000.
Maybe that would work out much better and creates larger Buy Orders to more effectively use the Reserve of 8000. . .but I am not going to work that out right now
Finally, the fact that the Money Spinner has an identical PC-Correction Formula this leads me to think that fundamentally AIM and the Money Spinner are genetically identical, almost like they are Identical Twins. . .in the execution of their daily lives they have their own peculiarities, on the detail level
Having outlined the main features of the Money Spinner, and having stated that perhaps more subtle information may be extracted from it I have started to read the rest of the manual again, and tried to find items that may not immediately be obvious from the basic stepwise procedure for finding Next Trade Prices. Indeed there are some remarks that are made by Chakrapani that are not immediately obvious from the basic procedures. These are, for now. . .take note, this text is mine. It is an interpretation of the Charkrapani advice:
1 Stick with low priced stocks initially. Although this recommendation is a bit fuzzy. . .AIMer Toofuzzy would love this
. . . part of the reason is obvious and is true for AIM and VORTEX: Low value shares have. . .especially penny-valued shares. . . a much greater relative price movement than high value shares, if they do move! A share costing 1 penny going to 2 penny represents a 100% relative increase. A share costing $100 moving $ 10 moves only 10% relative value and if the Hold Zone would be set at 11 % AIM nor VORTEX would advise trading. . .This is a general issue in regards to the Volatility Preference when AIMing. Chakrapani adds to this on Page 54: "Unless you have a lot of money to begin with, high-priced stocks are much less suitable for the Money Spinner Program compared to low-priced stocks".
This appears to state that if you have a lot of money to start with volatility is no longer a preferable feature for a stock to work just as well with the Money Spinner as volatility would do for an investor with only a little money as Start Capital. I think I know what Chakrapani meant. . .but he did not explain it here. In regards to this it is certainly true that dynamic investing with large trading volumes is burdened with much lower trading costs than low volume trading. I know that for example if I buy € 10 worth of shares here in Holland it will cost me € 10 on trading fees. . .unless I buy House Fund Participations from my bank. . . then the minimum I could buy is € 50 worth and that would cost me about 50 or 60 cents! In that sense Chakrapani is correct. . .but could it be that he means something else altogether? . . .Perhaps, would the Money Spinner work very different when large amounts are traded? If so, then I will find it IF it is explained someplace in the Manual.
2 Chakrapani's example was to start with a Share Price(SP)of 5 and the quantity of shares 1000----> Initial Equity = 5000.
Suppose now an investor has a lot more money available and wants to start with 3 or 4 times as much. . .Does the Money Spinner then simply turn out 3 or 4 times the Results? Essentially the important thing here is this: "Would you make more profit proportionally to a larger Starting Capital". . .Perhaps this is the clue to the unexplained issue in (1) above.
Chakrapani answers this with: No! and on Page 83-84 he goes into that issue in more detail:
A SPECIAL NOTE TO THOSE WHO WANT TO START WITH A LARGE NUMBER OF SHARES
Suppose one starts with 3000 shares at the price of 5, @ 50% CER the total Start Capital is then already 30000 instead of 10000. But why would that make any difference? Consider the AIM and Vortex Trade Advice Generators receptively for a particular Holding Zone:
AIM Trade =(PC-V)-x*V. . . . x is the SAFE
Vortex Trade =(PC-V)*M . . . M is a Multiplication Factor
If x=0 and M=1 then both AIM and Vortex are Ratio Systems. So, if you increases the initial investment Y-fold relative to a Small Start-up then after an up-down cycle with a Sell in it, the Profit for that cycle is also Y-fold relative to the Small Start-up. . .if trading costs are disregarded for now. Chakrapani states this about that:
“The main problem here is that your MSI (Minimum Sell Interval) and MBI (Minimum Buy Interval) could be so small that a but or sell order could be triggered when it is not really profitable. To avoid this we suggest you do the following (when you initial number of shares exceed 1000)”
Here I summarise that advice in short*:
3 Round up the number of shares from what you intended to buy to start with to the next 1000-multiple. . for example 2500-------> 3000 and so on;
4 For the fowling trades buy or sell no less than 1/10 th of the starting share quantity (in this example 300). . . .Set up the MSI and the MBI accordingly as instructed before;
5 In the required stepwise calculations for calculating the MSI and the MBI, as well as calculations for the Number of shares to buy or sell, after a Buy or Sell has been executed, substitute the number of shares that was 100 in the Instructions with the 300 as in (4) above. . .should you have started your Money Spinner with 5000 shares and Total Capital of 50000 instead of 10000, then use 500 shares in these calculations. . . .This procedure is said to be particularly critical when trading penny stocks.
· Charkrapani did not explain, up to this point, what to do if one selects to trade stock that are say $ 100/share or more. Possibly other than the fact that these high priced stocks would trigger trades rather less frequently because of the normally lower percentage price changes no other changes are required. These recommendations here appear to be only for share quantities greater that 1000.
· The last remark for this procedure being especially critical for penny stocks is not explained. I wonder why that is. Maybe it is for the reason that when starts trading high value stocks in great quantities the Money Spinner mechanism is no longer relevant as other financial criteria for professional trading are more important than those that are meant for Amateur Investors.
In conclusion, this additional information at least demonstrates that the Money Spinner is certainly not a Ratio System like Vortex is. . .It appears to be highly non-linear in regards to both share price level and share quantity magnitude. This would make it rather difficult to change the Money Spinner into an Automatic Investment Manager that can be applied to stocks at any arbitrary share price and arbitrary trade volumes.
To which extend the Money Spinner is comparable to AIM is rather less obvious to me, as for AIM when the SAFE x is not zero, it deviates from the Ratio System Principle in the sense that it's Buy & Sell Magnitudes are reduced in proportion to the Safe Value x. . . The Lichello Brake. . .It would appear however that the Money Spinner does this with the principle of these Algorithms in which N1 is the initial number of shares that are bought with 50% of the Total Capital:
A) Calculating (+/-)0,1*N (+/-) 100 shares for finding the next Trade Price for cases in which is started with N1<=1000 shares.
and
B) Calculating (+/-)0,1*N (+/-) N1/10 shares for finding the next Trade Price for cases in which is started with N1 > 1000 shares and using for N1 multiples of 1000 shares.
Let's call that The Chakrapani Brake
It would appear from this that the Chakrapani Brake is a much stronger Brake than the AIM Brake.
6 An interesting question remains: If one would want to start with s CER other than 50/50. . let's assume 80% Cash. . .how would this effect the Money Spinner?
From what I have seen so far it would possibly have a negative effect in the outcome because if one would start out with 10000 Capital and a Price of $5 the Initial Equity and PC would be only 2000 N1 would be 400 instead of 1000, and the next buy Price would the be calculated as follows:
i Shares owned =400
ii Add 10% = 440
iii Add 100 Shares-----> B= 540
Buying Price = PC/B = 2000/540 = 3.70
MBI = 5 - 3.70 = 1.30 This compared to 0.83 is very different.
It would translate to Hold Zone 1 = 26 %
The Buy Order would be 100*3.70 = 370 as compares to 417 before
It could be that at the next buy price of 3.7-1.3 = 2.4 the Buy would be large enough so that everything would come out OK. Lets try':
PC2 = 2000 + 370/2 = 2185
A=2185/2.40 = 910
N2= 400 + 100 = 500
N2+10% = B = 550
To Buy @ 2,4 = A - B = 910 - 550 = 360 compares to ~ 390 before!
And the Buy = 360*2.40 = 864 as compared to 1203 before. Thus with this approach the Reserve of 8000 is not well used at that low price and the with the MBI of 1.3 one would have to wait far longer than if one had started with 1000 shares to the next price of 2.4-1.3 = 1.1. . .which is a 54% drop from 2.4 and 78% drop from 5.
Obviously this is NOT a reasonable approach. . .Unless one uses Ocrofts Up-trend Method
I would suspect that maybe instead of adding 100 shares in the calculation one might instead try to add 1/10 of the shares, just like is done for the case with N1 > 1000.
Maybe that would work out much better and creates larger Buy Orders to more effectively use the Reserve of 8000. . .but I am not going to work that out right now
Finally, the fact that the Money Spinner has an identical PC-Correction Formula this leads me to think that fundamentally AIM and the Money Spinner are genetically identical, almost like they are Identical Twins. . .in the execution of their daily lives they have their own peculiarities, on the detail level
Conrad Winkelman
What is Vortex AIMing? Look for my Vortex Discussion Forum:
http://investorshub.advfn.com/boards/board.asp?board_id=1341
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