Hi Bob, Thanks for the analysis. Quite helpful in understanding the (X)x positions. BTW, maybe my brain is still on vacation but, what is GRC?
As to 1.5x, 2x, or 2.5x being the best leverage position to trade, if you have 5 people in a room talking about this I'd bet there are at least 7 opinions being floated about.
As to timing, it is clear that that is critical. The issue is how to implement it. AIMs approach works, especially if one delays buys in a choppy market like we have now. Jason Kelly's 3% Signal is another variation and I have heard of one, can't recall who, which suggested setting targets and selling 1/4 or 1/3 at each target on the way up. I'm sure there are others as well.
What I don't see, except here, is what to do when the market starts to fall, as will always happen.
Using the split buying - 1/3 now, 1/3 later and 1/3 when you think the bottom is very near or just past is one good approach. In a 50% total down market, similar to the last two bear markets would result in, assuming $50 peak price, buying at ~15% off peak using standard AIM settings, with the next buy at roughly 25% off peak and the following at roughly 35% off peak because AIM has a tendency to shorten the spacing on both buy and sell trends. Your price would be about $37.50, a long ways from the $25 bottom.
However, if one broke it down 1/4 at each step you'd wind up at approximately $35, a bit better but still 40% above bottom.
I'm not sure how to fix the spreadsheet so it would repeat buy at the same ~15% drop each time.
Another approach could be if one combined the split buys with apportioning the amount bought at each step, say 15%, 20% 25% and 30% you'd wind up with 273 shares at a price of, assuming you were putting $10,000 into the trade, ~$32.76/share, a bit better, only ~31% above the bottom, and still have ~$1000 left in cash to put to use using Orcroft's measure.
The advantage of an approach like this is that one never knows when or where the bottom will be. It is is just a "market correction" of 20-30% you'd get some of the benefit.
A key potential problem with Orcroft's approach is how tightly do you monitor the prices to find the second up tick from the bottom. Given the common volatility of markets as they bounce back up, doing it monthly could cause you to miss a very big portion of the recovery. Quarterly would likely make you miss the bulk of the move up. So does one look at it daily? I don't think so as the day to day volatility would likely mask where the bottom was. Weekly? I'm not sure. On one test it worked well but on another id did not so I'm not sure.
Best,
Allen
