A thread on Price Based Systematic Investment Plan (PB-SIP) methodology which I follow for my stock investments ๐Ÿ‘‡

In this thread I write about
- What is price based SIP?
- Features of PB-SIP
- What is the merit of Price Based-SIP over Time Based SIP (TB-SIP)?

Note:
- This methodology is NOT backtested (so, it could be bullshit). I follow this approach because it makes logical sense to me

- This method is not about how to pick the right stocks. This is about how I do SIP in the stocks that I already shortlisted based on fundamentals
What is SIP?

SIP is a methodology where an investor invests in an instrument in a periodic manner.

The metric widely used to define periodicity is time i.e, SIP is done monthly or bi-weekly or quarterly.

However the periodicity could also be dictated by price instead of time.
What is Price Based SIP?

- PBSIP is the type of SIP where you do a SIP instalment when price action gives you a signal to buy

- The time intervals between two PB-SIP instalments is uneven and dictated by price action

- The SIP instalment amount is also dictated by price action
Features of PBSIP:

- SIP amount is proportional to how far the buy price is away from 52 week high

- During downtrend, the SIP amount will be equivalent to martingale type position sizing

- During uptrend, the SIP amount will be equivalent to pyramiding type position sizing
Lets say we have 14 stocks in folio & invested 1L in each stock to begin with. Now we want to do PB-SIP

The rules:

1. Buy when Supertrend 7,5 gives buy in 1H chart
2. SIP amount=X*Y/14

where,
X: % buy signal is away from 52 week high
Y: total invested amount (=14L for 1st SIP)
Example

ASIANPAINT ST75 level in 1H is 17.7% away from 52 week high

TITAN ST75 level in 1H is 3.8% away from 52 week high

Lets say first AP gave a buy, then TITAN gave a buy

1st SIP amount in AP = (0.177*1400000/14) = 17700

1st SIP amount in TITAN = (0.038*1417770/14) = 3848
Intent here is to buy more of stocks under correction, assuming that the underlying company is quality enough that its stock price โฌ†๏ธ in long run

We can multiply SIP amount in equation with risk_appetite_factor, which โฌ‡๏ธ with each passing year, as we inch closer to corpus target
Potential demerit of this system:

Stock with the highest % return (ex TATAELXSI) in our portfolio will have least amount invested as buy signals would have been near 52 week high

Stock under consolidation/correction (ex ITC, HUL) with lowest % return will have higher weightage
Favorable scenario :
In stock like RADICO, we SIP-ed small amount during the hyperbolic run up (Apr-Dec'21) and are SIP-ing big amount now when it is under correction

Ideal scenario:
Stocks like ITC run up big some day, and we have accumulated it enough using this methodology.
I chose ST 7,5 as it gives 10-15 buy signals in an year, which fits my requirement

One can finetune ST parameter and risk_appetite_factor as per needs

Conclusion:
Time based SIP is agnostic to price action, which I feel is non-ideal. Price based SIP potentially overcomes this.

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๐™Ž๐™๐™–๐™ง๐™ž๐™ฃ๐™œ ๐™ข๐™ฎ ๐™ฌ๐™ž๐™จ๐™™๐™ค๐™ข ๐‘พ๐’๐’'๐’• ๐’ƒ๐’† ๐’”๐’–๐’“๐’‘๐’“๐’Š๐’”๐’†๐’… ๐’Š๐’‡ ๐’•๐’๐’Ž๐’๐’“๐’“๐’๐’˜ ๐’– ๐’“๐’†๐’‚๐’… ๐’•๐’‰๐’† ๐’”๐’‚๐’Ž๐’† ๐’”๐’•๐’–๐’‡๐’‡ ๐’Š๐’ 50๐’Œ ๐’˜๐’๐’“๐’Œ๐’”๐’‰๐’๐’‘ ๐’๐’“ ๐’”๐’๐’Ž๐’†๐’๐’๐’† ๐’Ž๐’‚๐’๐’‚๐’ˆ๐’Š๐’๐’ˆ ๐’š๐’๐’–๐’“ ๐’Ž๐’๐’๐’†๐’š ๐’˜๐’Š๐’•๐’‰ ๐’”๐’‚๐’Ž๐’† ๐’๐’๐’ˆ๐’Š๐’„
Simple and effective way 2 make Money


Idea 1:- Use pivot level like 14800 in case of nifty and sell 14800straddle monthly expiry (365+335) exit if nifty closes on daily basis below S1 or above R1

After closing below S1 if it closes above S1 next day or any day enter the same position again vice versa for R1

Idea2:- Use R1 and S1 corresponding strikes multiple
Incase of R1 15337 take 15300ce
N in case of S1 14221 use 14200pe
Sell both and hold till expiry or exit if nifty closes below S1 or above R1 around closing
If the same bounces above S1 and falls below R1 re-enfer same strikes

Use same criteria for nifty, usdinr and banknifty

(This is must)Use this margin rule for 1lot banknifty pair keep 4Lax margin
For nifty one lot keep 3Lax
For usdinr 100lots keep 4Lax

I bet you if you do this on consistent basis your ROI will be more than 70% on yearly basis.

Couldn't explain easier than this

Criticisms are most welcomed.