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Tuesday, 4th January 2022 09:51 - by Moosh
Naturally, it’s only right that I bring you examples of volume buying in action so you get an idea of my thought processes and become more familiar with the concept of volume buys.
ABDN is a company I have never invested in before and it has never been on my radar but on 2 December 2021, I noticed that ABDN had recently announced the takeover of Interactive Investor, a popular broker for retail investors. I had a quick look at assumed cash status and was comfortable with that.
In order to calculate the volume buy, I started from the August 2021 peak price and the units to 2 December 2021 gave me a quantity of 272 shares to buy, £629.60 total spent.
I sold 272 shares on 24 December 2021 for 3.75% profit, ~£23.
Above: Three month ABDN chart
My volume buy used standard units, that is, there was no scaling up or down. The buy was 100% dictated by the market. It was the market that told me how much to buy and it was the market which turned a profit for me. All I was doing with volume buying was reacting to the market. This is what I mean by volume buys removing the emotional aspect of investing. I didn’t need to top up because any additions would’ve averaged up, and that’s against my core rule.
If this example has made you think, then watch out for future blog posts where I will be focusing more on AIM companies and demonstrating how the market tells me how much to buy. As volume buys are based on volume, the more volume the market puts through, the more I need to buy, and vice versa. This means that I can still have exposure to low volume companies but with a lower value to buy. This probably sounds obvious but it has positive impacts on money management and portfolio growth/stability. Using volume to dictate buy size inherently accounts for a variety of risk factors.
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.