Trade Table

Consider a price series consisting of two parts: the upside and the downside. The upside is the group or prices that start with the lowest price (bottom) of previous cycle and end with the maximum price (top) in the series. The downside starts with the next price after the maximum price and ends with the lowest price of the downside. This series of upside and downside prices is called a cycle. The following price chart shows a series of 10 hypothetical monthly closing prices. The upside has six prices and the downside has four prices.

The Trade Table

CTM computes the percent return, (Sell price - Buy Price)/Buy Price, for each buy and sell combination (trade) and then classifies each trade as a winner (makes money) or a loser (breaks even of loses money).

CTM stores the percent return for each trade in the Trade Table, which is organized by buy and sell dates for each of the following three CTM trade types:

A buy upside and sell upside trade occurs when a purchase date occurs before the peak price and a sale date occurs on or before the peak price. So both the buy and sell occur on the upside of the price pattern. An upside buy can not occur on the date of the peak because CTM dos not allow a buy and sell on the same date. An upside price pattern with a few down prices has more winning trades than a pattern with many down prices The buy upside and sell upside trade type has the highest proportion of profitable trades of the three trade types.
A buy on the upside and sell on the downside trade occurs when a purchase date occurs on or before the peak price and a sale date occurs after the peak price. A buy occurs on the upside as prices are rising and a sell occurs on the downside as prices are falling. The proportion of profitable buy upside and sell downside trades is usually less than the proportion of winning trades for the buy upside and sell upside trade type.
A buy on the downside and sell on the downside trade occurs when a purchase date is after the peak price and a sale date is after the peak price. So both the buy and sell occur on the downside of the price pattern. A downside price pattern with few rising prices has more losing trade than a downside pattern with more rising prices. Of the three trade types, the buy downside and sell downside trades have the fewest profitable trades.

The following Trade Table shows the 10 hypothetical monthly prices and the
resulting 45 trades. Note: The number of trades = ((Number of prices) x (Number of prices - 1))/2 = (10x9)/2 = 45. The gains and losses are expressed in percent.

Locate the Sell Date and Sell Price columns on the left side of the trade table. The next column to the right includes the gains and losses for the buy and sell combinations for the first buy price, which is $10.10 and occurs on Jan-02. The buy prices and dates are located in two rows at the bottom of the table.

For the first buy price, the first sell price is $12.50 on Feb-02. So the gain for the first buy and sell combination is 23.8%. The second sell price is $11.20 for a 10.9% gain. The third trade results in a 44.6% gain for the $14.60 sell price. The last trade for the first buy price occurs on Oct-02 at the $12 sell price. The gain is 18.8%. There are nine trades for the first buy price.

The second buy price is $12.50 and occurs on Feb-02. The first trade for this buy price occurs on Mar-02 at the $11.20 sell price for a 10.4% loss. The second trade occurs on Apr-02 at the $14.60 sell price for a 16.8% gain. The last trade for the $12.50 buy price occurs on Oct-02 at $12 for a 4.0% loss. There are eight trades for the second buy price.

The third buy price of $11.20 has seven trades and the fourth buy price of $14.60 has six trades.

The last buy and sell combination, which occurs on the Sep-02 buy date and the Oct-02 sell date, results in a 20% loss. There is no trade for the last price in the series on Oct-02 because a buy and sell transaction on the same date is not allowed.

CTM Trade Type Summary

There were 45 trades for the 10-price series. The winning trades out numbered the losing trades 29 (64.4%) to 16 (35.6%). The average gain for all 45 trades was 12.1%. The largest one-trade gain was 67.3%. The largest one-trade loss was -29%. Note: The total number of trades = ((number of prices)*(number of prices-1))/2.

Buy Upside and Sell Upside Trades

There were six upside prices and 15 buy upside and sell upside trades. Thirteen trades (86.7%) were profitable and two (13.3%) lost money. The range of returns was a high of 67.3% to a low of -10.4%. The average gain was 23.7%. Most buy upside and sell upside trades made money. Note: The total number of buy upside and buy upside trades = ((number of upside prices)* (number of upside prices-1))/2.

Buy Upside and Sell Downside Trades

For the 24 buy upside and sell downside trades winners out numbered losers 15 (62.5%) to 9 (37.5%). The average gain was 11.2%. The maximum gain was 59.4% and the largest loss was -29%. The majority of buy upside and sell downside trades made money. The total number of buy upside and sell downside trades = (number of up prices)* (number of downside prices-1).

Buy Downside and Sell Downside Trades

For the six buy downside and sell downside trades five (83.3%) lost money. The average return was a 13.3% loss. The largest gain was 4.5% and the largest loss was -22.1%. Most trades on the buy downside and sell downside were losers. Note: The total number of downside trades = ((number of downside prices)* (number of downside prices-1))/2.

Use the Web-based buyupside.com Stock Return Calculator to compute the percent winners and losers for any price series.

Updated November 19, 2008.