We speak today of a topic basically unrelated to algo trading, but that can still be automated…

The accumulation plan (Savings plan)

The term “accumulation plan” (savings plan) is used to indicate the operations of investors who, at periodic intervals, buy shares of the same financial instrument with the prospect of keeping it in the portfolio for a specific period of time.

For example: we decide to buy $200 of EXON shares each month.

The main objective of those who venture into this operation is to keep the stock in the portfolio for very long periods, thus taking advantage of the increase in quotations.

We have used the PAC calculator (Italian acronym of Capital Accumulation Plan) available on https://www.nef.lu to calculate the theoretical profitability of this long-term operation, simulating a constant increase in quotations. (The website is in Italian).

Simulator of Savings plan

Need Help? Book Your FREE Strategy Session Today! >>

Suppose we can identify a stock that is constantly increasing by 3% for 30 consecutive years and reinvesting profits, our returns would have been interesting.

Piano di accumulo


Blog readers would be wondering how the concept of an accumulation plan can relate to algorithmic trading.

Let’s take it one step at a time and answer this first question: is it reasonable to think of an accumulation plan that has a stock as an underlying asset? According to the writer, it is, and there are three solid reasons:

1) investment in equity (shares) is, together with real estate investment, one of the few ways to protect yourself from inflation. The listing of the stock also reflects the increase in inflation;

2) the dividends that separate some shares are often greater than the returns of funds invested in bonds (government or equities);

3) historically, from a long-term perspective, the stock market is characterized by a markedly bullish bias.


The classic use of PAC is not without criticism. We can identify three major flaws:

1) it exposes us to default risk (see the ENRON and MERRILL LYNCH cases);

2) it has very deep and long lasting drawdowns;

3) operations are characterized by generally low returns.

I would then add that most readers, being traders, would get bored.

Let’s try to test our idea of a share PAC:

Operational rules:

a) we divide the capital dedicated to our operations into 12 equal parts;

b) starting from January, at the beginning of each month, we invest a certain sum in the same stock;

c) we liquidate all our positions at the close of the calendar year;

By deciding to dedicate $12,000 to this operation, we should invest $1,000 each month. We will do this mechanically, regardless of our vision of the market.

We see below the activity of three years investing in the Ford (F) underlying.

PAC Ford (F) shares - trades during a positive year

PAC Ford (F) shares – trades during a positive year

PAC Ford (F) shares - trades during a positive year

The above-represented is the optimal situation that, clearly, occurs when the year closes on the maximums

PAC Ford (F) shares - trades during a negative year

PAC Ford (F) shares – trades during a negative year

Observing the graphical representation of the monthly revenue and annual output it is clear that it is a pure money management system rather than a trading system.

The annual output was designed to protect us from the default risk of the company we are investing in. This is a partial protection: in January we would be exposed to only $1,000, $6,000 in June and so on. The worst case would be if the company we are investing in goes bankrupt in December.

In the next post we will try to answer the question “is it convenient to invest in PAC?

Need Help? Book Your FREE Strategy Session Today! >>

What do you think about this post? Don’t forget to share your thoughts in the comments below!

And if you think the content is valuable, feel free to share it with your friends! 🙂
If you want to know more about this topic, you can talk to one of our tutors by booking a call here.

Ordinary member of SIAT (Italian Society of Technical Analysis, a branch of IFTA), Mario Cesolini graduated in Financial Market Law at La Sapienza University of Rome in 2003. He began to study financial markets and in particular technical analysis in 1999, specializing in programming trading system, in developing options strategies and in volatility trading on the Contango curve of the VIX Index. In October 2015 he won the SIAT Award as best technical analyst of the year in the Forex category.