Patrick
Full time employment: Posting here.
Well I am not smart enough to figure this out with some simple computer spread sheet--just pen and paper so very slow BUT so far-I have done a little data checking--and as I suspected--most of the time the market rarely has more than a few months in a row of sequential losses...from 1950 to 2000 there were a few dry spells- in the mid 60's there was a 6 in a row, and in the 70's an 8 in a row, followed shortly thereafter by a 9 in a row skid...BUT as I suspected IF - and it is a big IF--IF you have unlimited ability to increase the bet a progressive system does generally win more than it loses....particularly with a market where you do not generally lose all of your bet...but even in an all or nothing ROULETTE WHEEL- contrary to what Ha is saying it is a statistical fact that more often than not you win --you don't win a lot but wins are more common than losses....BUT when you lose you can lose HUGE!!!! You have to win more because in any 50 50 scenario the winning and losing has to be equal--and we all agree that there is at least a small chance of many losses in a row and a huge loss--so if there is a small chance of losing huge then there has to be a large chance of winning a little to make it all balance out--it is this imbalance and the need to have huge amounts for the rare bad streak (and the limits on large bets) which keep anyone from actually succeeding at betting progressively in any casino....it is not beating the odds--the odds say that in a game with 50/50 chance (not quite accurate with roulette because of the green numbers) you will win as much as you lose (MONEY WISE) but if you could bet unlimitedly and progressively - you will be up more often than you are down--but when you are down you will be down very very big...
With investing it is different because it is not a win all lose all and there are dividends, etc...BUT if you started progressively investing in the S &P 500 at the beginning of the WORST streak in the last 60 years (December 1922 to Nov 1, 1974) and started with 1 unit investment- you would have had to sunk 512X your initial investment in once in the last BAD month of a 9 in a row streak--but the next month you would be up over all by about 2.5%...but you would be up and if you never sunk another nickel in-because you shot your wad -- a year later you would be up 30% total...not including dividends in any of this calculation
ON the other hand if you invested the exact same amount in equal measure over the same time frame you would be down at the end 22% and if you never put in another nickel, because you shot your wad -you would still be down 3.8%.
Now the next calc-which I have not yet done is to see what happens when you do this in a good mostly up market--because the even investments are going to be bigger in the beginning and therefore benefit more than the more timid progressive inputs-in fact less is going to go in because you cannot know how much you will be putting in ahead of the fact--still I can't help thinking that a general increase after a bad month, whatever you can afford and a return to baseline after up months might not be a slightly advantageous inputting strategy in a market that in the long run is expected to go up. Unlike dice and roulette wheels- the market does have a memory and a trajectory.
A few questions so I can understand how your strategy is supposed to work:
What is your cash percentage at the beginning?
When will you sell stocks to replenish the cash?
What is your cash percentage after having sold the stocks so you can begin to purchase stocks again?
PS - on an unrigged roulette wheel you do not win more often than you lose. You lose more often than you win. Even in a 50/50 game of chance you win 50% of the time, therefore you lose 50% of the time. If you win more than 50% of the time, it's not a 50/50 game.