VORTEX AIMing

[Conrad]

Hello Ray

I really like your suggestion of using a Dollar Amount decline for Consecutive Buy Indicators instead of using Percentage Declines as a method to slow down the Cash Burn rate.

To make sure I am understanding this correctly, please let me know if this is correct:

An investor has a stock which he purchased for $10 a share. He decides to let it decline 15% before he makes his first purchase. When the price declines to $8.50 he makes his first Buy (a decline of $1.50).

Now then, he doesn’t make his second consecutive Buy until it drops an additional $1.50, or down to $7.00 a share ($8.50 minus $1.50).

His third consecutive Buy would be around $5.50 ($7.00 minus $1.50).


Let me first point out that the method of using the

Minimum Buy Interval
Minimum Sell Interval

as is first suggested by Chuck Chakrapani in the Money Spinner and as I have outlined this on the AIM Forum See this for the Calculation Method:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78924095
I seen to remember that this only used for small value stocks.

Note that according to this Money Spinner Method when you start with a price of 5 the Min. Buy Price =4,17 and that is a price drop of 16,7 %.

What you are doing, starting at a Hold Zone of 15%, is on principle the same thing but when you get to the price of 5 the %-drop in price is already 27 %

Price/New price/Price Drop
10,00 / 0,85 / 0,15
8,50 / 0,82 / 0,18
7,00 / 0,79 / 0,21
5,50 / 0,73 / 0,27
4,00 / 0,63 / 0,38
2,50 / 0,40 / 0,60

This would of course be a good way of reducing the Cash Burn Rate. I think I may have mentioned before that this amounts to an exponentially increasing Holding Zone. I had this idea on the past but at the time I tried to implement that as a mathematical formula. This a lot simpler. In Vortex AIM I have not formalised this. At the moment the User enters a percentage and the program advises a Trade at that percentage. The user can easily use the above table and after the Buy at 15% drop can enter the 18% drop and after a Buy at 18% he can enter 21%. . . etc. That is a few seconds work. This way you have to work your way back up the ladder when the price starts rising.

On the Selling side he can do the same thing. It takes a bit more work to adjust the Holding Zones. This could be automated. . .sure. . .but the question is: “What do you do if you use a Share Price of 100 to start with?”. You might want to start with 15% but is it effective to use 18/21/27/38 but the likelihood that a $ 100 stock will behave like that will be rare, and then you might want to be worried if it does J. Using a less progressive drop may then be better like 15/16/18/21/24.
In the AIM Forum we have discussed such Step Ladders quite a bit with ls7550 and he seems to think that it is a good way of sequencing the trades. The Step Sizes are calculated form the Trading Range Band.
In the Money Spinner it was done with a Manual Method but it could be changed into an algorithm so that the Ladder Step Size could be made more or less aggressive. .Using the Money Spinner basic approach you could use X% instead of 10% and us Y shares in stead of 100 shares. I think I discussed that option in one of my posts.

Of course, using the Filter Method. . .Ref. Ocroft. . . to not Buy until a price reversal occurs is also a very good way to reduce the Cash Burning.