CTM Sell Curves

The Complete Trading Model (CTM) computes the percent return for each buy and sell combination of a price series. Using these returns you can study the the effect of buy prices and buy dates on percent returns. For example, you would expect the highest returns to result from purchases at the lowest upside prices and earliest upside dates. The lowest returns would result from purchases at the highest prices and dates near the middle of the cycle.

The following analysis is for all buy and sell combinations for Kulicke & Soffa (KLIC) for the price cycle from September 9, 1996 to October 8, 1998.

The following charts show the percent returns for all buy and sell combinations for Kulicke & Soffa (KLIC) for the price cycle.

The first chart shows the percent returns for each sell date of a price series. The vertical axis of the chart is the percent return and the horizontal axis is the sell date.
The second chart shows the percent returns for each sell price of a price series. The vertical axis of the chart is the percent return and the horizontal axis is the sell price.

Sell Date Curve

The chart of returns plotted for sell dates follows the same general pattern as the KLIC price series chart. Returns increase and then decrease. Each data point in the column of returns for a given sell date represents a different buy date and price. The highest return in the column is for the lowest buy price. The lowest value in the column is for the highest buy price for the sell date.

Returns increase as the sell dates move from the first to last on the upside. The largest return, 509 percent, occurs on September 8, 1997 sell date at the peak price of $27.59. The buy price was $4.53 for the September 9, 1996 buy date. After the peak, returns decline as buy and sell prices decline. The largest loss, -80 percent, occurs for the purchase made on September 8, 1997 and sold October 5, 1998 at $5.55. The wavy patterns of returns result from the up and down price moves from their general trends.

Sell Price Curve

The return/buy price chart does not show the sell price for each buy and sell combination but the chart includes the information to compute the sell price for each trade. After you compute the sell price for each buy price/return, you can chart the percent return over sell prices. This chart gives you another graphical view of the CTM percent returns.

Computing Sell Prices

Recall that the percent return for a trade is computed by the following equation:

Return = (Sell Price - Buy Price) / Buy Price

When you solve the equation for Sell Price, you have:

Sell Price = Buy Price * (1 + Return)

Therefore, to compute the sell price you simply multiply the Buy Price by 1 plus the Return. For example, assume the buy price is $4.53 and the return is 509%, expressed as 5.09.

Sell Price = $4.53 * (1 + 5.09)
= $4.53*6.09
= $27.59

Therefore, all sell prices are implied in the return/buy price chart and all sell values can be computed from the returns and buy prices.

All Sell Prices

This chart shows the percent returns plotted over sell prices for all CTM trades in the price cycle.

The most striking pattern on the chart is the linear relationship between the sell price and percent returns.

The first point on the line is for the $5 sell price with a 10.38% gain. The last point on the line is for the $27.59 sell price with a 509% gain. The line has a positive slope indicating returns increase as sell prices increase. Also, the slope of the green line is the steepest for the lowest buy price. And the slope of the iso-buy line decreases as buy price increases. This says that the percent returns change the most rapidly for a change in sell price when the buy price is the lowest.

Therefore, as the buy increases the change in percent return decreases for a unit change in sell price. Simply put, you make more money as sell price increases if you paid less rather than more.