Hi all, for the last two weeks or so, I have had this idea in my head. Has anyone experimented with using two PC's (portfolio controls), one for buying and one for selling? I no longer have a AIM spreadsheet, so I will have to build one from scratch, to test the concept. As anyone who has read Mr. Lichello's book knows, for a long time he tried to have PC be increased by the full buy amount, he reluctantly gave up on that and used 50%.
Here is my idea, have two PC's, the (buy PC) is only added to when you have a sell. The (sell PC) is only added to when you have a buy. I think if you do it this way you can use the full amounts of the transactions, and eliminate the double buying when you have had a large price drop, and eliminate the selling at a price below the average cost.
A quick example, you have $10,000, both PC's are set at $5,000.
At a stock price of $10 you buy 500 shares. Now the stock price falls to $5, you have a loss of $2500, so you buy 500 more shares, you now have 1000 shares, the (buy PC) stays at $5,000, but the (sell PC) goes up to $7500, the same amount you have invested. The next month you check and the price is still $5, so the stock value equals the (buy PC) so there is no additional buy. The next month when you check you find that the stock price has gone back up to $10, you now have $10,000 worth of stock, but (sell PC) is at $7500, so you sell 250 shares, leaving you with 750 shares. Being that you have sold $2,500 you increase (buy PC) by this amount to $7500. At this point both PC's are again the same, $7500.
I believe that this will work, but it needs to be tested in a spreadsheet, and I don't know when I will get around to it, so I am throwing the idea out here for someone else to do the hard work.
I think what you will find is with deep divers your cash lasts longer, also I think you will have more profits. But again it needs to be tested.
Take care,
Clifford
Come see me at Systematic Investing group #board-966 lets talk formula plans.
