Ray - here's what I gleaned from that guy's descriptions

(1) Start with a corpus - $10K
(2) Divvy it up 1/2 and 1/2 - Potential investment and Cash held
(3) You need 2 thresholds/parameters for the strategy -
(a) BTD - Buy the Dip ( I have this as alpha)
(b) STP - Sell the Pop

he has it equal - but realistically for this to even have a shot - STP needs to be a multiple of BTD IMHO

(4) A check on the Theta ie the Monthly drop or pop for it to exceed the alpha ( 1 and 2 if you keep them separate)

(5) Well - you have to kinda get the algebraic formulation - its simplified for a code or spreadsheet implementation.

That's how the Invested side goes up and the Cash held side depletes.

Its a function of the difference between Theta and Alpha applied to the current corpus on both sides - basically you invest based
on the
Additive ( ie incremental investment)

Corpus/2* [ 1 - alpha +alpha*theta]
and obviously take out the $ being invested - which gives you

Subtractive

Corpus/2 * [ 1 - (theta - alpha) + alpha* theta]


And SINCE its applied on a compounded basis - the cash side will converge towards zero but will never reach it since its an infinite series.

Hope you have enough to run this thing!

I am very curious about the results and see if my hypotheses hold up

Best

Mechanical Investing FAQ

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