23.1.07

My Market Theory

Well, lately I have been thinking a lot about the stock market. It seems like an easy way to make a lot of money very quickly, or lose a lot of money very quickly. But I think I found a strategy that over time when well applied virtually guarantees at least some gain from money invested.

Granted, I could be totally off the mark on this one, and if I am I would love to hear your theories, but I thought this was worth writing about. (That and I couldn't think of anything else, ;) .)

The first thing that you have to do is to pick a reliable stock. Something that isn't going away any time soon, and is traded in high volume. Make sure it's E/P is fairly low too, it needs to be a well valued stock.

Second, buy a some shares in that stock lets say 15.

Now comes the weird part.

If the stock goes down by two dollars, buy 15 more shares. If it goes down another two dollars buy another 15. (Obviously you have to set a limit for yourself i.e if it goes down buy 40 dollars you shouldn't still be buying, unless you think it is grossly undervalued.)

If the stock goes up by two dollars, sell 15 shares. If the stock keeps going up, and you have no more shares to sell, look at the E/P and if it is extremely high and the stock goes down by two dollars, don't buy more shares. Wait until you get a reasonable E/P before you start the cycle over again.

If you test this theory either with a fake portfolio or with the real deal, I would be very interested to hear about it.

3 comments:

Anonymous said...

Hey it's your bright idea.. why don't YOU throw some of YOUR money at it and let the rest of us know how it goes?

-"What?! Experiment with my own money when I have gullible readers to do it for me?! I'm not as stupid as they are!"

Fox said...

First of all, I had planned to do it myself with a fake portfolio. Second, I wasn't asking you to spend your own money on it, I was asking a. what your opinion of it was and b. if you had any theories of your own that you had tested

bankrupt said...

Thanks a lot, just lost four grand, what a stupid idea.

How am I going to explain the loss of the kids college fund to the wife?