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Compute maximum and minimum price levels

The wise trader versus the un-wise trader.

Enter the 52 week high, the 52 week low and the current market price to compute the maximum possible and minimum possible prices 30 days into the future with 100% accuracy

This formula works on any market. Stocks, futures, Forex, options, bonds etc

If you have been enraged by the results given in the boxes on the left, then I apologize for the frustrations. But I have to warn you that placing restrictions around prices is not a good practice.

Its a common mistake to presume to know that a market cannot rise above (X) or fall below (Y).

Advanced pro traders know that it is very dangerous to believe that a theoretical maximum or minimum price other than zero or infinity can be relied upon.     See the PROOF lower down the page

The traders that usually get wiped out are those who believe in price targets as being  "cast in stone". When they are wiped out, they usually blame the market for doing something surprising.

Just think about that for a second., blaming the market for being too high or low is the same as blaming a number for being too high or to low? Isn't that like for blaming a man for breathing, or blaming a fish for swimming?

Number are just numbers, if you add to them they rise, and vice versa.

 

 

 

 

52 Week high                                 

52 Week low                                  

Current price                                  

Max. price 30 days out                     

Min. price 30 days out                           

More "shocking facts" below

Example No1

Enron plc

 

Showing a minimum price of zero, was once a hugely popular investment entity with the public and institutions alike. False accounting was going on behind the scenes and the company collapsed in 2001

Those in charge were running a systematic, creatively planned accountancy fraud, which later became know as the "Enron scandal"

 

Minimum price = zero

Example No2

 

The (ZSE) Zimbabwe stock index 

Maximum price = 4,000,000 an approximate 40,000 fold increase.

( This is not infinite, but it sure is a drastic increase from 1000 in 2006.

The money printing of financial genius (sarcasm) Robert Mgabe lead to hyper-inflation in Zimbabwe which in turn caused rocketing stock prices.

Investors in stocks apparently faired somewhat better than those who held cash. For the general public, the outcome was not very good, as the price of three eggs reached 100 billion Zimbabwe dollars in 2007

See videos of hyperinflation

Maximum price = 4,000,000 (not infinity but very high)

   

Example No3  

Polly peck plc

Polly peck started off as a small textile company, which under the leadership of  Asil Nadir made it all the way into the FTSE 100 index in the eighties. The company went bust in 1990 having unfunded debts of 1.3 billion. 

The Polly Peck scandal as it came to be known led to so law changes in the UK to prevent such fraudulent companies from operating again. Many expert analysts were fooled by Mr Nadir who impressed everyone with his "successful image" all the time the reality was very different. Michael Walters who wrote for the Daily mail, was amongst those taken in by his silver tongued approach.

 

Minimum price = zero

Thanks to Peter for providing this chart

Example No4  
Bernie Madoff

What happened to all the money?

 

Madoff ran a "ponzi-scheme" which is a fraudulent operation so designed to create the illusion of wealth and prosperity but in reality is nothing more than using new investments to pay off those who wish to make withdrawals. Investors were attracted to his 12% annual returns and he played hard to get when taking on clients, making them believe he only wanted money from a few select people. As a result they were falling over themselves to invest.

When the stockmarket became weak in 2008 Madoffs investors became jumpy and many wanted to withdraw funds, Madoff had already spent most of the money and decided to confess to the authorities.

The SEC were warned many times that his 12% interest growth was physically impossible, but they failed to investigate the alarm bells raised years earlier.

He is currently serving a 150 year prison sentence in USA.

 

What happened to all the money?

Bernie Made-off with it

 

Minimum price = zero

Example No5  
LTCM (Long term capital management)

The correct name would be long term capital mis-management.

This company even won a nobel prize for its expertise! LTCM had calculated maximum levels for option volatility based on a comprehensive study of historical data. Their model assumed that prices had upper boundaries and should be short sold when at the upper boundary. Their model also made a the fatal misjudgement to assume that prices would move in orderly 0.25 increments with good liquidity at each level. They did not factor that markets can gap in large amounts.

LTCM  returned around 20% a year to clients until the Russian debt default of 1998 sent option prices soaring to previously un-seen levels. As they were "short of volatility" their losses were catastrophic.

Maximum price of option volatility = infinity Therefore...

Minimum price of LTCM fund = zero

The moral of the story has to be this. Just because its never happened before, it doesn't mean it wont ever happen.

 

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                                                                                          Disclaimer please read carefully
 

All the indicators, functions, signals and formulas available from PrecisionTradingSystems have been selected for their high levels of efficiency as trading tools.

However this does not guarantee success when using them on all markets you choose to trade in.

Risk of losses are high with even the best systems, and a good understanding of risk control mechanics is required before using any products you have received from PrecisionTradingSystems.

You are responsible for ensuring all precautions have been taken in your trading decisions and PrecisionTradingSystems cannot be help responsible for any losses you may incur while using its products.

These products and formulas are designed for Traders who have several years experience of trading, if you do not consider yourself in this category then please invest some time to study your methods carefully before risking any money.

 

 

 

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