The Trend Follower's Guide to Money Management

Strategic Sandbag Buying/Selling And Pyramiding.

Unlike COL's EIP (Easy Investment Program) that tells you to buy

 X Worth of Y Stocks Every month. The system's SSB or SSS

 (Strategic Sandbag Buying/Selling) and Pyramid helps you 

time your entries and exit efficiently and effectively.

Before we proceed, here's

How EIP works:

Let's say you allocate 10k of your earnings to 

stocks each month. You want to buy PXP every month.

Month 1 : 

PXP Price = 1

PXP Shares you buy = 10,000

Month 2 :

PXP Price = 2

PXP Shares you buy = 5,000

Month 3 : 

PXP Price = 5

PXP Shares you buy = 2,000

By Month 3, you end up with 17k Shares of PXP with 1.76 
as your Average Price. Pretty neat huh? 

In EIP, you buy on a set date
 without regard to the price or the event that took place.

The problem with this kind of 'strategy' is that there is no

value given to the trend. What if the trend was down?

What habit and mindset will this create?

"Hurt me more!!!! Ram it down and we have a deal! 

Gusto ko ng maraming maraming shares! Bodega pa!"

While this is good for investors with deep pockets and lots of time,

 It may not necessarily hold true for the person who wants a "quick

 buck" after a few months of waiting.

I'm not saying EIP is bad. But if you use out of context, it will be.
Especially when you're planning a "Basura Mutual Fund."

I know I'm fictional, But trust me when I say
That I've seen worse.

At this point, I will assume that you've already read the 
Osmosis post, The Trading Port and The Port Class.

And before you buy anything. Make sure the stock you're planning
 to buy has already made an AOTS. Coz a ZS might be fake.
---> Click Here for ZS & AOTS Post. <---

Let's proceed.


Now in Sandbagging you should first identify how many tranches 

you will make. 1 having the highest risk, 4 having the lowest risk,

 and 2 or 3 being in between.

In our system, we have limited the number of tranches done to 4.

After you have decided the number of tranches, 
you can employ these two techniques:

A. Equal Tranche

B. Pyramid or Inverse Pyramid

In Equal Tranche Sandbagging, if you have a Budget worth 100k, 

and you decide to do a two-tranche, then you buy the first half on 

the first breakout, and the 2nd half on the next. This is like EIP, the 

difference is, you buy on the breakout and not on a set date.

In Pyramid, the lower the price, the bigger the volume or budget. 

So if you have a Budget worth 100k. And you're a "sigurista" and

 decide to go for a four tranche buy, this is how you will allocate 

your buys:

1st Breakout : 40,000 worth

2nd Breakout : 30,000 worth

3rd Breakout : 20,000 worth

4th Breakout : 10,000 worth

Example:

Chart as of 5/12/2015
Closing price at 5/13/2015

If you follow the pyramid type, your Average Price would most

 likely be found in the prices between the 1st Breakout to the 3rd 

Breakout.

What goes on in the trend follower's mind at this point?

"HOOOOLD! Lalim ng Average ko. Run profits! Run!"

But what If you employed a Single Tranche Buy? And it just so

 happened that the price dropped to the previous support, which is 

near your cutpoint? 

At this point, the trader would be like:

"#LMPI. Lapit na sa cut point ko! Sabi na nga ba eh. 

Dapat doon ako bumili."

And because you have used up your whole allocation for that stuck,

 sudden background music plays : Bakit ngayon ka lang...

--------


The inverse pyramid is usually done when selling.
The higher the prices go, the bigger the volume.
Good technique for Day traders who set TPs.

Now why buy on breakout rather than at support? Because on 

breakouts, it means that the uptrend is confirmed and more time is 

saved as opposed to buying on support and waiting for the 

consolidation to finish.

And why do we give importance to this?

Because in Trading, your mental state and health is just as
 important as your portfolio. If you trade when you're stressed and
 emotional, you are highly likely to lose. And when you lose, you
 might end up in this vicious cycle I call... 

Makabawi Syndrome.

What goes on in the trader's mind during breakouts?

"Yes! Uptrend ulit!"
#Goodvibes

And what goes on in the trader's mind during 

support testing and consolidation?

"Shetmemeng wag ka bumigay! 
YES! Oh Shet! Oh Shet! YES!"

#Patience #Panicmode #Dasalmode #FeelingStressed

Yep. You're too tense that you look like you got stunned for 2 
seconds by a storm bolt and you don't know how to react.


Now as to when you will sell...
I believe this old post will suffice.
---> Click Here for Patintero Post. <---

Here's a balanced "What If" table.
For NIhao.

And here's a case study on POPI.
(Pakipindot)