“The Investor's Compass” - Questions & Answers

We have heard from many of our subscribers seeking a little more detail regarding the DynaLogic platform, so we thought a Question & Answer discussion would be helpful.

Question: Why did you name your newsletter “The Investor’s Compass – Powered by DynaLogic”?

Sound investing is all about putting risk on and taking risk off consistent with an investor’s risk tolerance.  Buying a security is a positive experience in the beginning because the only expectation is for a positive outcome which makes an investor feel good.  Selling is the hard part because you are either challenged to sell a winner and possibly replace it with something that doesn’t perform as well going forward, challenged by having to pay capital gains tax, challenged to sell a non-performer (didn’t live up to expectations), or challenged to sell a loser and admit defeat.

The Investor’s Compass name reflects our commitment to guiding you through the complex world of investing. Our advanced algorithm not only allows you to mitigate risk by strategically trimming gains but also alerts you to unique opportunities to initiate or add to stock positions when prices are declining, thereby increasing upside potential. It's more than a newsletter; it's your trusted guide to navigate both risks and opportunities while making intelligent, logic-based decisions. In simple terms, we guide you to “Buy low & Sell high” in a algorithmic, methodical way.

Source: Investing Caffeine

Question: What was the genesis of the signal technology?

It really started over 20 years ago during the dot-com bubble when high flying tech stocks got crushed with many down 80-90% and others never to recover.  There needed to be a process that would harvest gains along the way to provide more protection to the downside.  Clients were more concerned about avoiding big drawdowns than they were trying to capture the upside.  The platform needed to be rules-based and without emotion. 

Question: How long has the signal technology been up and running?

There was extensive software development during the years that followed the dot-com era.   The initial signals began on March 9, 2009, which coincided with the bottom of the market during the Financial Crisis.   

Question: There is a robust list of individual equities, and ETFs.  Did you start out with a much smaller number?

Originally, there were several dozen index ETFs that were being tracked.  Mostly iShares and WisdomTree ETFs.  The list was expanded to approximately 70 when custody firms went to no commissions on their preferred list of ETFs, so we were tracking ETFs for Schwab, Fidelity, TD Ameritrade. It wasn’t until late 2021, that the platform started supporting individual equities.  

Question: Will additional securities be added to the list?

We can increase the list and expect that the list will change over time.  There will be new symbols added and some symbols will be dropped.

Question: You continue to espouse taking concentrated risk and using the DynaLogic sell signals to diversify the risk, something Warren Buffet supports.  If you build a portfolio of diversified individual equities, do you need to further diversify? 

A basket of individual securities does provide some diversification against specific “name” risk.  Microsoft is not Amazon, and Exxon is not Chevron, but if we were to look that the correlation of Microsoft and Amazon, we would see a number close to 88-90% because they are both in the broad Tech sector, or Energy sector, which says, the action of one will closely mirror the other. Additionally, the volatility of individual stocks, is much greater than the volatility of an index or sector to which it belongs.  Broad indices, like the S&P 500, have broad diversification.  Both Microsoft and Amazon are members of the S&P Index but their contribution to the index is limited by their percentage participation.  If you own Microsoft (MSFT) and it goes down 10% in value, your individual holding of MSFT went down 10%.  While MSFT is a member of the S&P index, the 10% decline in the price of MSFT would produce a smaller decline in the S&P Index.  Because broad indices tend to lag during bull markets, concentrated risk in individual securities has more upside potential. You just need to manage the specific risk.  

Question: I see on the new “Investor’s Compass you have added a Zone reference? Can you explain?

We have divided the Add/Initiate and Sell activity into 4 distinct zones. Zone 1 represents a security that is coming off a bottom and has “Substantial Upside Opportunity” and a better buy than sell. Conversely a Zone 4 has “Substantial Downside Risk” and is a better sell than buy. Think of these Zones as an expression of market sentiment. The more extreme the Zone the greater the probability of a reversal in price.

Question: Why did you add Relative Strength to your platform?

The DynaLogic platform is built on the premise of selling into strength and buying into weakness with the degree (size) of the signal small in the beginning and growing larger as the price of a security continued to move upward reaching new price objectives or downward reaching new price objectives as trends continued. The original patented platform was built to manage Index ETFs and what we found was by overlaying a Relative Strength Indicator, it improved the quality of the signal especially for individual equities.

Remember: “It’s not about winning; it’s about not losing.”

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(Note: DynaLogic provides to subscribers relevant and real time market movement information on a host of equity securities.  Signals (sell or buy) are based solely on mathematical changes in the price of a security.  No other methodology is used.

DynaLogic is not a registered investment advisor, and it makes no representation or recommendation concerning the purchase or sale of any security investment product; DynaLogic provides no advice or recommendation whether a subscriber should or should not act on any signal a subscriber receives, and it has no knowledge whether a subscriber, in fact, acts on a signal or any signal; DynaLogic maintains no portfolio account or other investment information on any subscriber.)