Hello Banjanxed,
Today I read your idea about accelerating Buys and Sells if more than one buy or sell occurs. This method is more or less similar to what I suggested in message # 1159. In a discussion with Mark(Aptus) the idea you explained created two opposed views:
1 Mark stated that accelerating the buys would cause cash depletion and then you would be caught with your pants down(my words) if the stock price keeps falling. Without the acceleration there would still be some cash left to buy at a lower price.
2 I stated that with my method this might happen with sustained price drops but on the average my investment would be more effective as I disbursed more cash at a lower price...depending on the acceleration function.
The key to the superior average performance of (2) over (1) is that with the increased buy rate at lower prices you as to why this is so is that without the acceleration you spend more cash too early...most of the discussions on his board focus on preventing such an early cash disbursement...and then you have only little cash left to buy at the low price...and if the stock price keeps dropping that you have no more cash with either method. So, on the average I would say that both methods will run out of cash at the same time, and then method (2) would perform better. Keep in mind however that I would, with method (2), at first sell buy less shares that the amount of the unmodified buy-signal. This would mean that for stocks with low volatility method (2) might not work very well, and method (1) may be superior.
Now for the selling case: The result would be the same but the question is if it is effective.... generally in a rising market it is more effective To Let The Profit Ride. It is therefore more effective to do some selling but a) in a retarded manner and 2) not too much. Again, if the stock has low volatility then it is not effective to do retard the selling.
Now, this acceleration idea of yours is a good one, but I do not understand why you would return the acceleration to zero after four buy-signals. It would be better, I think, to moderate the acceleration for a particular range of price drop and then run out of cash.
Regards,
Conrad
