Beat The Stock Market The Vortex Method What

Beat The Stock Market The Vortex Method

What is the Essential Point? n The Profit Function n Buy Low Sell High n When my son Damian was 5 years old he understood this. I sold him a German Mark for n Fl. 1. 25 and he said: “You can get it back for Fl. 1. 75!”

What do you want to achieve ? n Execute the profit function repetitively! n n When is a share price Low ? When is a share price High ? n You the Investor determines that!

The Method n 1 Determine how much money you can afford to loose. Call this the Investment (I) n 2 Split the Investment in two parts. 3 Part 1 = Reserve (R). . Money in the bank 4 Part 2 = Equity (E). . Something you have bought n n n I=R+E

I=R+E 1 Set R= ½ I n 2 Set E= ½ I n n . . . . (For example). . . (Initial equity purchase) This is what you could buy n 1 Valuable Stock n 2 Currencies n 3 An old house that you can fix

Investment Part E E Buy Sell You Buy and Sell in small parcels of E time

The Strategy: Buying & Selling n n n Buy = Fb*(E 1 -E 2) Fb= 1/(1 -f) ---> Fb > 1 E 1 = old value E 2 = current value. . . E 1 > E 2 Sell = Fs*(E 1 -E 2) Fs= 1/(1 -v) ---> f <1 . . . E 2 > E 1 For f & v negative you get: Fs > 1 v <1 Fb & Fs < 1

Strategy: Buying & Selling Part 2 ?

The Skewed Growth Ratio n n 1 2 3 4 Sell 1 share @ $ 100 The price drops to $ 50 Buy 2 shares @ $ 50 Price rises to $ 100 (See next page) n New Value =2*$100 = $ 200

Value growth as a Graph The skewed Growth Ratio

Buying & Selling? as prices + or -

Value Development n Compound interest Model V= Vi*(1+ Rn)^n n = number of trades

Boundaries / Limits / Factors 1 Price Changes 5 % to 20 % 2 Reserve Value 30% to 80% of I 3 Factors f & v - to 0, 99 as you like it Choices depend on Investor Profile: f & v -1000 Buy & Hold f&v 0 Conservative f & v 0. 5 Aggressive f & v 0. 99 Very Aggressive Fk f&v 1 Not applicable f&v <1 Buy becomes a Sell This is not usefull

Example: Buying n n n I= 10 000 R= 5000 E = 5000 (Initial Conditions) Price 1 = 10 N= 500 units f= 0, 75 v= 0, 5 Fb = 1/(1 -0, 75)= 4. . aggressive buying Fs = 1/(1 -0, 5) = 2. . moderate selling Price 2 = 8. . . 20 % drop (R+E=PV= 9000) Buy = 4*(5000 -4000)= 4000 Qty to buy n =4000/8= 500 New quantity N= 1000 New equity value V= 1000*8 = 8000 New Reserve Value R= 1000 Portfolio Value PV=1000+8000=9000 Loss on Initial Investment = 10%

Example: Selling n n n I= 10 000 R= 5000 E = 5000 (initial Conditions) Price 1 = 10 N= 500 units f= 0, 75 v= 0, 5 Fb = 1/(1 -0, 75)= 4. . . aggressive buying Fs = 1/(1 -0, 5) = 2. . . moderate selling Price 2 = 12. . . 20 % rise (R+E=500+6000= PV=11000) Sell = 2*(5000 -6000)=Trade= – 2000 (algebraic notation) Qty to Trade n =-2000/12= -167. . . (algebraic notation) New quantity M = 500 -167= 333 New Value E = 333*12 =3996 New Reserve R= 5000+167*12=7004 Portfolio Value PV=3996+7004=11000. . . Profit on Total Investment = 1000/10000*100% = 10%

Effect: Skewed Ratio n n n n n Rising Price: P=12200; Profit = 10%; Price rise = 20%. This is a result of the 20% price rise on only 50% of the initial investment capital. Sold Shares Number = 167 As the price rises more the selling of more shares has a decreasing effect on the total value of the Portfolio. Herewith one creates profit security because the money is in the bank! Dropping Price: P=9000; Loss = 10%; Price drop = 20%. This is a result of the 20% price drop on 50% of the initial investment capital. Bought Shares Number = 500 As the price drops more the buying of more shares at a lower price for a certain amount has a positive effect on the number of shares in the portfolio. Because of this leverage effect as the price reverses the value of of the portfolio increases sharply. Leverage effect on shares= 500/1000= 2

Price Cycle Effect n n n n Share Price Structure: + 2 - 4 +2 No net Difference Identical start conditions. Price 1=10. See page 15 f= 0, 75 Fb = 4 v= 0, 5 Fs = 2 Price 2 = 12. . . 20 % rise New Value E = 333*12 = 3996 New Reserve R= 5000+2004=7004 Portfolio Value PV=7004 +3996=11000. . Winst = 10% Price 3=8. . 33, 3 % drop PV=9668 E= 2664 R=7004 Buy=4*(11000 -9668)=5328 Qty to Buy=5328/8=666 N= 999 E=7992 P= 9668 R= 1676 Loss = 332 or 3, 32 % at a 20% drop in price, referred to the Start Value!

Price Cycle Effect-Continuation n n n n Price cycle: + 2 -4 +2 No net difference Identical start conditions. Price 1=10. See page 15 f= 0, 75 Fb = 4 v= 0, 5 Fs = 2 Price 4 = 10. . . 25 % Rise New Value after execution: Sell n=400; N=599; E = 599*10 = 5990 R=5676 Portfolio Value PV=11666. . . profit = 16, 7% In this price cycle there is a ~17% profit realised and the price is back at 10. The Equity & Reserve are both grown A Buy & Hold method would not have realised any profit.

Accumulative Effect n n Price Cycle Profit is ~17% on the total invested capital of $ 10000. Assume that trading costs would be 2 %: Cycle Profit = 15% If a price cycle like this occurs 5 x per year the annual profit calculated with the compound interest formula with 15% per cycle period is (See page 12): n n n V= Vi*(1+ Rn)^n Vi =10000 Rn = 0, 15 n=5 End Price =10. . . no change n V= 10000*(1+ 0, 15)^5 V= 20114 n Annual ROI = 101%/yr n !

Turbovest n n n I= 10 000 R= 5000 E = 5000. . (page 14) Price 1 = 10; N= 500 units f= 0, 75 v= 0, 5 Fb = 1/(1 -0, 75)= 4 Fs = 1/(1 -0, 5) = 2 Price 2 = 8. . . 20 % drop (R+E= 9000) New Value E = 1000*8 = 8000 New Reserve R= 1000 N= 1000 Value PV=1000+8000=9000. . . 10% drop Price 3 = 6. . . 25 % drop E= 6000 Borrow 70% of 6000 =4200 Extra Inv. =4200 Qty=4200/6 =700 N= 1700 E=10200 PV = 11200 Net Value 11200 – 4200 = 7000 R=1000 Price 4= 4. . . 33, 3 % drop

Turbovest. . . Continuation n n N= 1700 R= 1000 E =6800 PV = 7800 Borrow 3700 (is < than 70% of equity value) Total loan = 7900 & there is 1000 as Reserve Buy 4700/4= 11175 N=2875 E= 11500 PV = 11500 Totale Inleg = 10000 + 7900 = 17900 Net value= 11500 -7900= 3600 R= 0 Net debt =7900 -3600= 4300 Leverage effect =2875/500= 5, 75 Price drop is 6/10 ------- 60% With the extra buying at extra low prices de leverage ratio reaches ~8. At that point the price drop would be approximately 70% @ 75% on the break-even point, at which the borrowing power is exhausted. END