Pump up the volume!

Monday, 20th December 2021 10:10 - by Moosh

Hello again. I haven’t been in hibernation. When I was a kid, my parents were always suspicious when I was quiet because it meant that I was up to something, and nothing has changed! I have indeed been busy behind the scenes thinking, researching, testing, analysing and forming conclusions for a volume based buying strategy.

As a regular buying cost averaging investor, I was wondering if I could use volume to dictate how many shares to buy. Since testing began in Summer 2021, the results from 28 trades are encouraging in that I can use volume successfully to build up a holding gradually and also to use it to monitor trend strength. I wasn’t expecting it to be so useful with a quick turnaround but here we are. I am still in test mode but I thought it might be useful to anyone who likes to be more careful regarding money management.

- Catch up with Moosh's previous blog posts here

For example, day 1 volume is 2m shares, or 2000k shares. Let’s call this 2000 units. Units can be either shares or value. If in shares, this can be scaled up or down, for example 10 units is 1 share. For value, 1 unit could be 20p. This is great as you can control the scaling of units depending on your own financial situation and on the fundamentals of the company. There is also flexibility regarding when you choose day 1 to be and whether you only buy if subsequent buys after an initial buy average down or not. From experience, I will tend to continue volume buys until they no longer average down, after which price usually trends up.

Most importantly, volume buys take the emotion out of investing. I will calculate the total to buy until it exceeds a threshold value, subject to not averaging up as just stated. Depending on volume, buys can be at 1 to 3 week intervals.

I am currently repurposing any released capital from old tranches into volume buys going forward as I am confident with the results I am getting and I get to have reasonable exposure which I am comfortable with and they acknowledge the role of the market.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.