Guys, I promised I'll come up with a formula for the bear market which is like short selling only the difference you get loan from your own shares instead of borrowing from your broker. The formula is more of short selling than averaging down...coz with averaging down you will need to add up more money from your pocket which you might never have. But with my formula its different you wont have to add more money to reduce or clear your losses or even you stand a high chance to make a profit with a little patience. Maybe most of you are already doing this but there are people who dont know what to do when things get bad. Im going to do it practically to prove it how it works. I believe be it bull or bear...there is always money to be made in the stock market. Criticism are welcome but please dont be harsh coz you all know me...you might put me off. It works very well with the idea I had posted a forum earlier, but for now I will not include that here but I will use example that will work for everybody...no secrets this time. You can use this formula with your existing shares and see how it will work...anyway of improvement, questions, is welcome or if you fell it doesnt sound realistic and you have evidence to prove it...is welcome. After all we are all here for the same purpose,to make money. share whatever you have...For those of you who are already doing this...I would love to know the name of this formula...This one is mostly for those who are scared of the bear...
I will use mumias as an example, although you can use any counter...
Lets say you had 91000 and you purchased mumias when it was Ksh. 13
I will use 2.1 broker fee coz most people still use 2.1 with their broker...I will also minus for both buy and sell orders so that to get accurate money figures.
91000*2.1/100=1911
91000-1911=89089
89089/13=6853 shares
I will omit the odd 3 to cover up for stamp and if there is any fee
Lets assume you will sell at a loss of Ksh. 8
13-8=Ksh 5 loss per share
6850*8=54800*2.1/100=1150.9
54800-1150.8=53649
Calculating the loss you got from selling at a loss
89089-53649=35440
Your total loss is 35440
What will you do to recover the 35440?
53649*2.1/100=1126
53649-1126=52522
Lets say you will keep the money and you will come to buy the shares during election time and maybe they will be trading at Ksh 4
52522/4=13130 shares
I will not include the 30 shares for any occurance
13100 shares lets say you will get rid of them at Ksh.8 when things are good after election
13100*8=104800*2.1/100=2200
104800-2200=102599
Now lets go back to the drawing board to see what you will make or how much you will recover from your 35440 loss
102599-91000=11599
Note this: You have recover the 35440 and you have made extra 11599 totalling to 102599 instead of 91000 you had started with
End of my formula.
If I did averaging down, it will mean
6850*4=27400*2.1/100=575.4+27400=27975.4
I will have to look for extra Ksh.27975 for me to be able to sell @ Ksh. 8 and above to recover the loss ie 27975/4=6990shares
To put it simple 13+4/2=8.50
But with all these problems...why the hell will you add up money to buy shares...just use the existing ones...you wont feel miserable....
Please I would like to hear your comments especially from @thedeal