Roy Tipping created his own method of measuring share price performance called “Tipping’s Mathematical Ratio” or “TMR”. He shares with readers the results it produces, detailing buy and sell indicators. His programme also provides an insight to wider market activity, with some startlingly accurate forecasts,, including the 2007 crash.
A former BBC producer and self taught computer programmer and investor, he took voluntary redundancy from the BBC in January 1993, and since then has worked as an occasional freelance writer with particular reference to the use of computers in personal finance and investment advice. Since July 1995 he has been a regular contributor to The IRS Report concerning the use of my bespoke computer program TMR (Tipping’s Mathematical Ratio) in successful investing.
TMR came about because of perceived strengths and weaknesses in the Coppock Indicator, widely used as a guide to investing. Developed in 1954 by Edwin Coppock, the indicator named after its creator attempts to spot changes in sentiment in the stock market, as seen in the Dow Jones Index. More specifically it was developed for showing when a Bear Market was ending and a Bull Market was on the point of developing. Although designed for this narrow purpose, it was quickly found that the Coppock Indicator also worked well for other indices, including the FTSE-100, when these were changing from decline to appreciation. Where the Coppock Indicator did not work well was in the reverse direction – a Bull Market running out of momentum and developing into a Bear Market. It also worked very badly for individual stocks and shares, producing many whipsaws amongst which it was difficult to discern true and profitable signals. It was to investigate whether it was possible to eliminate these deficiencies that TMR was developed.
The Coppock Indicator works essentially by looking at the current value of the Dow Jones Index and comparing it with the value of the same index at a fixed point in the past – four years is the usual figure. These two values are also averaged and damped to get rid of daily noise in their values. Applying the same principle to other indices, stocks and shares produces values that vary from the miniscule – some penny shares might vary in price by fractions of a penny over four years – and the gargantuan – some stocks might have values measured in tens of thousands of pounds with corresponding variation. I realized that what was common to both was the ratio of today’s price to that of several years ago. There was also nothing magic about Coppock’s choice of four years – this was an intelligent hunch on his part that happened to work for the Dow Jones. There is no reason to suppose it would be the same for other indices, stocks and shares.
Coppock did all his pioneering work on a mechanical calculator, a tedious and error-prone activity. I not only had access to high speed computers but had taught myself computer programming from the earliest days of domestically available computers – indeed the first computers I used were home-built by me since commercial products were astronomically expensive and probably wouldn’t do what I wanted, anyway.
TMR was written over several years using a super-set of the programming language Pascal, known as Delphi. TMR improves on Coppock’s basic concept, but, in the process, eliminates whipsaws and investigate many other notions which he had researched in publications. Roy discovered that the fixed stop-loss and the trailing stop-loss were essential tools for the serious investor, and that the value for these can be very different for different classes of securities, for example, gilts and penny shares.
Roy has used TMR for many years. In only one of those years has his portfolio performed worse than the FTSE-100. Some years have seen spectacular results: in 2002 the FTSE-100 lost 25% in value: Roy’s portfolio increased by 24%; in 2013 the FTSE-100 improved by 12%: his portfolio improved by over 26%. The losing year was 2009 when the FTSE-100 increased by 26% and his portfolio managed only 8%.