Constant Value Investing

Z

ZEAK

Hi,

I was thinking of trying this concept on a more volatile stock, like APPL and say on a daily basis, thinking that if the stock moved enough, that I would always be buying lower and selling higher. Well, after plugging in 3 months of data into a excel sheet, it proves to have lost money....yet I do not understand why.

I was rebalancing the stock at the close of every day, only if it moved either direction by at least its share price. So, based on $30K, if it was up $250 I would sell one share and if it was down $500 I would buy 2 more shares, to keep the account balance at $30K all the time.

Can anyone out there shed some light on why this strat did not work, or possible ways to make it work?

At mid point it was up over $3000. Do I need more data? Do I need to rebalance weekly instead of daily?

Any input is welcomed. Thanks
 
you might be surprised to find that with all your tinkering, your strategy's results will be very similar to a staight buy and hold position. Depending on the commissions you'd be paying, it may be better to just hold long.

Maybe I'm old school, but I don't like to make moves too often, but when I do, I make relatively large moves. Hope you find something that works for you.
 
Quote from ZEAK:

Hi,

I was thinking of trying this concept on a more volatile stock, like APPL and say on a daily basis, thinking that if the stock moved enough, that I would always be buying lower and selling higher. Well, after plugging in 3 months of data into a excel sheet, it proves to have lost money....yet I do not understand why.

I was rebalancing the stock at the close of every day, only if it moved either direction by at least its share price. So, based on $30K, if it was up $250 I would sell one share and if it was down $500 I would buy 2 more shares, to keep the account balance at $30K all the time.

Can anyone out there shed some light on why this strat did not work, or possible ways to make it work?

At mid point it was up over $3000. Do I need more data? Do I need to rebalance weekly instead of daily?

Any input is welcomed. Thanks
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I think the strategy is doomed to failure because you are buying on downtrends and selling on uptrends, probably well before its appropriate. For example, many stocks that set new 52 week highs often do so many times. You'd be constantly selling your position on each daily move, when the best strategy is hold your shares ( and maybe even add to your position ) until confirmed major new resistance has been found.
 
Quote from ZEAK:

Can anyone out there shed some light on why this strat did not work, or possible ways to make it work?
More...
Zeak, you are doing something wrong. Post your spreadsheet and maybe I can tell you where the problem lies.

The method is fully explained in Edleson's "Value Averaging," available from Amazon used for less than $10. Also there is a spreadsheet on Gummy Stuff with the correct calculations.
 
Quote from ZEAK:

I was rebalancing the stock at the close of every day, only if it moved either direction by at least its share price. So, based on $30K, if it was up $250 I would sell one share and if it was down $500 I would buy 2 more shares, to keep the account balance at $30K all the time.
More...

During a downward price trend this method could lose money.
 
Quote from Kevin Schmit:

Zeak, you are doing something wrong. Post your spreadsheet and maybe I can tell you where the problem lies.

The method is fully explained in Edleson's "Value Averaging," available from Amazon used for less than $10. Also there is a spreadsheet on Gummy Stuff with the correct calculations.
More...

The problem lies in using a faulty strategy. Averaging down and systematic churning of your account can't be good. The book's in the $1 bin for a reason.
 
If you do it once a quarter or perhaps monthly, you'd have less churn on the account. Also, you can have rules, but if I am only to buy/sell a tiny set of shares (ie, 5-20) 'just' because the plan says to at a given time, I would ignore such a 'signal' since a trade of that size just isn't worth it, in my view.

Value Cost Averaging is a viable thing for a long-term portfolio but I don't think it appropriate for daytrading.
 
There's no single mechanical trading method that is successful over all types of markets .... excepting the brokers, because they get the commissions :)
 
Quote from ZEAK:

Hi,

I was thinking of trying this concept on a more volatile stock, like APPL and say on a daily basis, thinking that if the stock moved enough, that I would always be buying lower and selling higher. Well, after plugging in 3 months of data into a excel sheet, it proves to have lost money....yet I do not understand why.

I was rebalancing the stock at the close of every day, only if it moved either direction by at least its share price. So, based on $30K, if it was up $250 I would sell one share and if it was down $500 I would buy 2 more shares, to keep the account balance at $30K all the time.

Can anyone out there shed some light on why this strat did not work, or possible ways to make it work?
More...

To be blunt, and without bothering to puzzle through the details, this strategy has no edge. If it did, people with a lot more capital and sophistication than you and I would jump on it and smooth away any edge that might have existed.

In order to take a position and make money from it, you have to be predicting something - and predictions can always be wrong. You are trying to avoid confronting that truth, but the market doesn't give away freebies like this - at least not consistently.

In order to make money with this you'll need to :

1) identify a repeating market pattern or behavior that would allow this strategy to operate with a profit
2) find some means of predicting the pattern/behavior in 1)
3) define your risk and entry/exit conditions, etc.
 
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