I like the basic concept of your Never Lose strategy but I tend to get lost in some of your explanations.
Am I correct in assuming for the simple case that, if I have a total of $12,000 to invest, I would buy $1,000 of stock at the start of every month. If the value of the stock fell to $950 at any time in the 12 month period following each particular purchase, then I would sell. If the value remained above $950 then I would sell 12 months after the purchase and take whatever profit accrued (in practice presumably I would only sell stock to realise the profit and would keep the $1,000 invested as the investment for the next month). As I say, I like the concept, but in practical terms I am not able to get 5% interest on cash and it is difficult to achieve 5% dividends. Therefore there is the potential for, say, a 3% loss in a year which would impact upon overall returns over a 5 or 10 year period. I am unclear on how you would handle profits. Perhaps profit for any particular month would be divided by 12 and subsequent monthly investments increased accordingly?
I am not sure I understand how you work out the probabilities for the leveraged case, however I assume that with a similar total of $12,000, I would invest $1133 each month and then proceed in a similar manner.
I would be interested to hear whether my understanding of your strategy is correct. I would also be interested to know whether you had considered using a moving stoploss for each monthly investment so that profits would be locked-in at any time that each investment suffered a reversal instead of waiting to the end of the 12 month period. For example, using a monthly $1,000, if after 3 months the stock had risen to $1,200 it would be sold if it then fell to $1,150. I appreciate that this may not allow the profit to run to its full extent but, on the other hand, it is probable that there would be fewer positions closed out without a profit.
Ken
AI
