is retired now but still kicking like a horse!
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More Sorry, Clive!
I was too Fuzzy when I though you said sorry, so I had no idea it was TooFuzzy that said sorry.
Sorry, I was too Fuzzy to notice who had said sorry!
What a wonderful language English is. . .
This reminds me of a lecture on how difficult English actually is, with all its inconsistencies and exceptions, and how incredibly smart small children are to be able to actually learn it as fast as they do. I made up a little story for the kids:
The father mouse said to the mother mouse and his three little children mice: "Our house is too small so we need to get a bigger house." The three little mice called out together: "But why don't we get and extra little house so we will have two hice instead of, on so we can stay in the little house and you two in the other house?"
Then the Mother mouse said: "But, children, if we get en extra house then we don't have two hice but two houses. Remember this, it's important to use correct English when you speak, . . .the plural of house is houses! OK?
"OK", the three mice called back: "Whatever, we heard you, as long as we have two houses it's fine with us".
Hi Clive, you don't need to be sorry
So what you are saying is you will see what the market just did AND THEN pick the method that would have worked best. 20-20 hindsight ... I just love it! Let me know when the program is finished!
As far as programming my idea's are concerned, that is a problem. I am not a professional programmer, I am having enough trouble with Excel as it is to get the simple things done(if that was not already quite clear)!
The fact that you "love" my idea at least appears to mean you are not trashing it but it is not exactly what I meant. It is not so much looking back what happened in the past but rather what prices are doing "at the moment". Of course that means that means looking back a bit is part of the game AND taking account of the economic situation of the day. That is already being done by any sensible investor. . .I would say 80% of the discussion here deal with these things. If a stock price is seriously deep-diving even skilled AIMers will sit up and notice and will know that something different needs to be done instead of simply to keep buying.
I am thinking more from the point of view of industrial control theory. With investing instead of stabilizing the output one wants, of course, to optimise the output in a positive sense. . .maximization of profit(positive feedback for Profit >0 )
My previous idea was using back testing and frequently updating the historical data set with "every day" adjustment. . . for each new data point you add, you drop the oldest price from the set and run the optimisation subroutine so that you get new trading parameters. One could even use an exponential modifier to give recent data more weight than old data. (In Vortex Cash Limiter I use 6 parameters, so optimisation would be very time consuming!) and then the next trade is calculated using the updated algorithm.
This basic idea is of course nothing new. In control theory this sort of thing is called "adaptive control". In such a system they use dynamic curve fitting and the process control system is optimised ast it goes automatically.
That is what I had in mind but the difficulty of programming it is the “Bridge too Far”. . .for me.
If I would be using a progressive ladder and the trading range narrows this scheme would still trade effectively. . .larger trades near the up/down limits! Clearly, if then a sudden large price change occurs one must rethink the scheme.
I constantly have to emphasise that my scheme is not meant for use as a Trading Robot. . . if the investor sees that the price jumps out of the trading channel he needs to either change the trading amount to outside of the given "advice" or stop trading or bail out.
In my Vortex AIM I have an automatic Reset: After every trade I restart the portfolio in "initial condition". The only thing that does not work automatically is to reset the CER to what might be a better choice from a rebalancing point of view at that time. Also I have no automatic optimisation as I would like to have, as outlined above.
The problem I have with reacting appropriately to a price reversal while using a progressive ladder is not easily decided on. As to your suggestion:
Would it make sense to use the ladder as long as the stock is moving in the same direction but then in order to have the reverse trade it would have to
1) move to that next step on the ladder but also
2) The ladder would be reset with that next trade as the midpoint (just before you actually do the trade? or after?)
I am not sure what you exactly suggest with: “move to the next step”.
Suppose the price rises to step 4 and the holding zone is just past then it is logical to execute # 4 trade(no reversal has yet occurred).
If then the price starts to drop then the question is what to do! The price behaviour is still normal so there is to be a standard response: I do nothing seem to be the right choice. In step 4 I have sold a large portion of equity and I am heavy in cash. . .that is good for a dropping price(changed equity value into profit). At least I should wait for what the price is going to do next. If it rises again I do noting. If it drops again then what to do?
It might be wise to simply do noting. . .doing nothing is impossible . . .I mean: "simply not do anything". . .as the price keeps dropping the buy opportunities at low prices increase. . .this is the Don Carlson MARCO Delay. I just keep waiting till the next reversal occurs. When that happens close to the Mid Point I simply Reset the system with the new CER Value. This is perfect.
When the reversal occurs at the bottom, what then?. From an AIM consideration this is ideal. . .all of the Reserve(or most of it) is used to buy equity(if the equity id worth buying). Then I can again use the MACRO Delay on the rising price and as long as the price keeps rising this is fine. If ten the price drops again before the holding zone is breached I do noting but otherwise I just wait to see what will happen. All I can think about here is that as long as the price goes to the limits I change nothing but if the price cycling starts to create a narrower trading channel then I reset the system to that new Mid Point of the new Trading Range that has developed. In the meantime with that newer narrower trading range it is more likely that pricess fluctuate at greater relative rate and higher trading steps are advised.
If this is about what you suggested in 1) and 2) then I more or less had in mind what you had in mind! . . .”that what happens now is the clue for what to do next”. It just requires a lot of attention and keeping in touch with the price behaviour almost every day.
I will try to implement this on the USD/EUR and EUR/UDS Experiment I am running.
What I have done recently is 1) to make a price record in Excel from the Vortex Windows program, from which I can calculate the price-step changes so I can see where on the ladder the price sits relative to the Trading Range, and trade accordingly, and 2) I have the Ladder Chart with the Trade sized defined, but I have only done that for the X equity. I still need to make the Ladder Chart for the 1/X equity. Then for each equity I have the Ladder Trades defined and I can implement the scheme with the MACRO Delays .
To have this all done automatically is completely beyond my ability. . . .this exoeriment is very time consuming. People on the "street" have noticed that I have been away for while already! Also <OT> I am busy with improving my system for selling pictures via internet:
http://www.vortexcw.nl/vortex/picto.html
Now that I am retired I am busier than ever and have the luxury to loaf around when I feel like it
Dividends. . interesting issue I have to deal with yet!
I would say that the cash from the dividend could used immediately to add shares at lower price:
1 Equity Value=V1 before Div. issue
2 V1=V2 + C. . .share price is lowered
3 Buy shares amount C
4 Now V3 = V1. . .approximately(1)
You treat this as a constant price situation. . .No Trade Advice Change should occur
5 Do not update the PC as
(PC1 -(s+1)*V3) should be the same as (PC3-(s+1)*V1)
Since V1=V3 then PC3=PC1
must be invoked so that your Trade Advice does not change from before Div. issue.
Everything remains the same this way!
In your program, if you have one, you must manually set PC3=PC1 so that the automatic PC-update does not occur.
(1)The day after the Div. Issue the share price could have risen already and it could happen that your AIM is "pregnant" and about the throw a trade advice. In that case you might as well update your system as I have suggested with the share price just after Div. Issue and then use the newest price as usual, and execute the trade that you get.
Well Clive, I think you are pointing out what I have more or less been thinking. . . after a trade reversal from falling to rising one of my option is to simply to invoke a delay filter so that I get closer to the Midpoint again. . skipping trades as you meant it I think!
Clive, your proportional ladder for 10 steps does not have the slow start I have at the midpoint. I have adapted my ladder to 10 steps to match yours and have imposed a progressive trade function:
Step..% Del R..Reserve..Buy
0.........0.........40000
1.........1.........39600.....400
2.........2.........38808.....792
3.........4.........37256.....1552
4.........6.........35020.....2235
5.........9.........31868.....3152
6.........13........27726.....4143
7.........20........22180.....5545
8.........30........15526.....6654
9.........50........7763......7763
10........100.......0......... 7763
------------------------------
Sum Investment.........40000
(I cant manage to get a picture put in! How do I do that?
The
[picture] [/picture] . . .picture = img
does not seem to work. . .I spend hours and hours to try to get this done!)
I mean this one I made up for it
http://www.facebook.com/profile.php?id=100000376827032#!/photo.php?fbid=167675829921643&set=a.167675743254985.30517.100000376827032
hours ago
Anyway, I can easily modify the last of the ladder so that a bit of cash is left at step 10:
Step..% Del R..Reserve..Buy
0.........0.........40000
1.........1.........39600.....400
2.........2.........38808.....792
3.........4.........37256.....1552
4.........6.........35020.....2235
5.........9.........31868.....3152
6.........13........27726.....4143
7.........20........22180.....5545
8.........30........15526.....6654
9.........50........7763......7763
10........70.......2329......5434
------------------------------
Sum Investment.........37671
and there is 2329 cash left to invest, if then the price goes through the bottom limit.
On the top I can do the same thing and have a certain amount of equity left in case the price keeps rising.. .defining all sorts of trade functions is not the problem. How to use them is!
The first "problem" I recognised is that close to the Mid Point the trading action is very small and if the price keeps cycling there the volatility capture is minimal. I think you referred to this. . . In any case I would need to program the ladder that as soon as the price gets out of the Holding Zone the trade on Step 1 should be about the Minumum Buy, of course.
On the other hand if the price moves al the way to the limit then I have an efficient cash burn. The investor should be prepared to change tactics if the price behaviour deviates form what was expected to happen. So the "problem" is no problem in this case.
The bigger problem I encounter with this type of progressive ladder is what to do when the price trend reverses half way to the limit. Suppose the price is at step #7 and hand a buy 5545 is executed and the price reverses. Since I am still in the Buy Region the Sell Ladder does not apply, and if I get to any selling then I have no solid plan (as yet) as to how much to sell (other than arbitrarily using various options there obviously are).
1. Wait for price to get out of Holding Zone;
2. Then sell on the normal Vortex AIM algorithm until price gets to the Mid Point, reset the ladder and let is go as a new starting condition. This means that I would not use the ladder on the way up but would use slow or delayed selling. If the price cycles the volatility capture does its job. If the price cycles a long time below the Mid Point then the Mid Point will drop automatically down, and the average cycle price becomes the Mid Point.. . .this is a piece of cake!
3 The other choice is that after a large buy on step 7 I switch the Mid Point to the new lower position, but then it s not really a mid Point. It would however ease off on the trading either way. This would be fine if the trading range has dropped down but if the price runs up then "ladder selling" would exhaust the equity too fast. This does not appear to be a proper action.
4 So, the problem I have with this progressive ladder is that I have no standard way of responding to the price behaviour like happens in normal aiming. This makes the simple idea of the progressive ladder difficult to capture in an [I]automatic response algorithm[/I]. What I should really have is several trade algorithms ready at hand and then let the price behaviour decide which trading model is to be used. A tall order that requires a lot of programming
It appears to be A Bridge to Far.
In my effort to see what happens with trading Inverse equities like X and 1/X with an exponential-like like Ladder structure I ran a 19 day test so far.
Initially I was not ready for the calculation scheme and traded with rough trade amounts based on larger steps closer to the trading limits than I would have if I had the calculation scheme ready in time.
Basically the trading steps from the Mid Point Price(Step 0)on the 10 Step Ladder (Full Trading Range) are, for the 5 steps up or down:
3% of Remaining value, Etc.
7%
20%
40%
100% -----> Fully invested at the bottom or fully sold at the top.
Run time = 19 days
For now my conclusion is that the method will work well but I have not ran long enough of course to make any meaningful comment other than that right now the calculations are mostly manually done and horribly time consuming
See for details
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56889138
As I have started the experiment with the currency pairs on the 29th October some results are in.
X=EUR/USD
1/X = USD/EUR
High Price X=1,4205
5/100
4/40
3/20
2/7
1/3 ------> On step 1 upwards -----> 3% of the Equity is sold. Etc
1,3863 Mid Point Price. Step Size =0,505879743 %
1/3 ------> On step 1 downwards----> 3% of the Reserve is used to buy Equity. Etc
2/7
3/20
4/40
5/100
Low Price X=1,3521
In principle the same ladder structure would be used for both currency pairs but of course with their own trading limits.
On 29 October I was not quite ready with the calculation scheme so I did not fully manage to exactly make the trades as per the calculation. I made a 4 trades as follows
Cash € 40000 Initial Capital----> € 20000 each Currency Pair.
CER = 0,9 after Start-up start for combined portfolios.
Price EUR/USD= 1,3918 Buy = 10000 units ---->€ 13918
Price USD/EUR= 0,7185 Buy = 10000 units ---- € 7185
I intended to invest with CER =0,5 but instead bough 10000 units of each.
1
On 4-nov(high point)
Sell € 5682 of EUR/UDS
Buy € 1169 USD/EUR
2
On 17-nov I(Low Pont)
Buy € 11763 EUR/USD ----> N=14700, Reserve= €1, V= € 19876
Sell € 8624 USD/EUR ----> 0 units; Reserve= € 20270, V = € 0
Profit = € 147
Period = 19 Days
ROI on I= € 40000 -----> 7% Annualised
ROTAI on I = 18015 ----> 15,6% Annualised
As in this case the investments were lumped more closely to the Trading Range Limits than they would have been if they had been calculated at every step-change in price the buying occurred more effectively and the selling occurred more effectively. The effect is a result of Trade Relay Filtering.
Compensating for this I would expect that at this early stage the yields might be more like ROI = 4% and the ROTAI = 8%.
As time goes by the trades will be more in line with the actual calculation on the non-linear Ladder and the effect of the more efficient trades earlier on will dissipate.
The Buy & Hold yield would have been:
-54,8 % Loss EUR/USD
56,4 % Gain USD/EUR
I will from time to time report on the progress on the basis of the trades per ladder structure above.
Hi there TOM Lol!
Re: Crazy Mess.....
From Billy Joel:
. .[It's the other guy that started the Fire!]. .
I think this Billy Joel did not want to be called the scapegoat, but he had matches and was lighting new fires while his buddies were putting out raging fires and saving old ladies and kids!
The Billy Joels are the Pyromaniac Fire Men among us. . . they wants to keep fighting fires all the time.
Of course, some of us are Saints.
OK AIMster,
As AIM advocates buying at lower prices, if we match a later sale to the first lot, we may actually have a loss, but if we match it to the last we should likely have a gain.
This sounds familiar to me, the Tax Issue!
But then it is still not a Sell of a AIM Lot but the Sell of an AIM BUY AMOUNT on a particular date. Right?. OK, then for the Tax Man there is a reason to give a beneficial Income Tax Rebate. . . OK, that I understand!
So the Tax Man doesn't give a hoot about the AIM-quantity and only purchase date and the IN-OUT and amount? Or does he actually look at the number of shares that were bought and share price and takes that as a profit basis, if there was any? Then the Tax Man actually treats the shares as if they were traceable units.
<OT> What type of cape does the US Tax Man wear when he comes flying by?
I am not Fuzzy, but I also understand that
. . .buying while averaging u is fine till the price stops rising. If the trader can sell quick enough then it is OK of course but then he should sell all!. . . that is clear. The danger is of course that in a price reversal the (panic)Sell Order may well be at the back of the queue and might be executed when the price has seriously dropped. . Big Damage to the Portfolio!
Especially this upward buying is often killer for Margin Traders. The whole idea is "sold" by brokers to make clients(victims?) buy without any assets behind the them and on the buzz of rising prices. When the margin trader steps out in time it works fine, but greed probably prevent him from doing so, at a price reversal the Sell Order might well too late and be at the end of a large queue. The margin trader could end up with a huge debt, which he probably can't pay off.
Sorry for becoming a nit-picker
The Topic if FIFO and FILO (or LiFO etc.)has come up various times here. I have also discussed it, and it in those discussions is became clear that for an particular equity the concept of FIFO and FILO simply can not apply. Any AIM Warehouse is like a swimming pool. . (as long as you do not buy shares and get the paper certificates!). The equity units are dumped in a pool and each lot becomes unidentifiable. All units are the same price. . .just like a bucket of water dumped in the ocean: molecules are not individually identifiable(unless future discoveries in quantum processes show that water molecules carry ID-tags).
All one can do is to look the first Trade size at portfolio set-up-time and consequently trade an identical number of units to sell off first or last, and then the SISO and SLISLO---->etc. will apply. . .unless of course you realise that the In-Out Schemes are Contrarien AIM Methods. The mains idea in AIM is to let the algorithm advise the trade size, and to deviate from it is CON-AIM.
Now, everybody here knows I am a proponent of deviating from the prime algorithm when ever I see fit to do that (and my advise to others is to do that too), so I am not all against SISO and SLISLO---->etc. in principle, if it is a profitable scheme.
My question is:
Is FIFO, SISO, TITO. . . . . or FILO, SISLO, TITLO. . .NINLO . .etc. actually advantageous?
What is the possible benefit of matching the quantity of a Sell to a quantity that was bought in a particular order?
That way the Sell Advice would simply be related to a Buy-Counter and the Buy-Quantity and the a price driven AIM Sell Advice would be superfluous.
<OT> Hi Grabber,
I vote for opening an OT Forum
Then there will be no clutter.
Everyting will OT and will be banned automatically before it gets published!
Neat invention!
As I have constructed various "progressive" ladder structures to invest/sell from the Mid Point(MP) of the Trading Range(TR). . .all this as an alternative to my standard Vortex AIM method). . . I run into [I]decision making[/I] problems.
1 As long as an equity price keeps rising or falling from the midpoint the decision making works great. . .the algorithm simply dictates as designed and the equity is sold efficiently and the Reserve is used efficiently. . . IF the equity price behaves as expected;
2 When the equity rises only partially and say the price rise has reached step 3 it begins to drop again. . .what do I do then? The Algorithm(so far) does not provide any trade advise. Vortex AIM would simple create a Buy Signal after a certain percentage drop but my Ladder has an progressive structure and I want to use that for the buying from the MP of the TR;
One of the options is to freeze the buying function. I wait till the price drops to at least the MP and then I start selling according to the progressive buy ladder.
Alternatively I could wait till the price is dropped to the low limit of the TR is reached and then turn the cash into equity. This would be efficient as long as the price cycles from top to bottom level. This behaviour can be achieved with appropriate filters but then one would miss volatility profits for smaller price fluctuation between the trading limits.
I have decided that this alternative would work with the filters to delay the buying to at least the MP if prices are in a short term down trend.. . For selling the same applies.. . after all THAT is precisely the purpose of the progressive ladder.
4 After contemplating this I realised that the Vortex AIM system is well suited for this progressive ladder idea. . .it already is functioning that way, more or less, IF one used a Delay Filter. Delaying the Buy would result in a larger buy size and delaying a Sell would increase the sell size;
Vortex AIM would, in Step 4, do exactly as I have proposes with my progressive ladder, except for the issue of the definition of the Mid Point Reference. When Vortex AIM in its current format executes a Trade the PC goes to 0. So in effect after every trade Vortex resets itself to an initial condition as when the portfolio was started. Only the CER is different due to the trading. If this is let to be that way then on Step 3 of the progressive ladder Vortex simply has created a new MP. For the selling that is fine if the price keeps rising. . . it delays the selling to a price above the TR upper limit. On the way down I need to invoke the filter concept.
5 The conclusion here is that I can not combine the normal Vortex behaviour for trading between the TR limits and capture volatility profit in between auto automatically. It is Of using the Filter + Vortex AIM or only Vortex AIM . In order to combine them effectively I need to add an extra management level above Vortex AIM.
Then I can decide, on the basis of market signals, either to have Vortex AIM operate with or without the Trade Delay Flters.
So when the Filters are on I would sell up to approximately 100% of the equity at the top of the TR en use up approximately 100% of the Reserve at the bottom of the trading TR. If then the price behaviour warrants it then I switch off the Delay Filters and trade as Vortex Aim normally does.
This extra management above the Vortex AIM operation is not a new thing although it is not part of AIM I have always advised to execute this type of higher management never: Never let AIM be the Boss!. . .one should always be ready to interfere with a investment system on the basis of market signals.
So, effectively have solved my operational problem with the Progressive Ladder:
· Set Sell Parameters in such a way that approximately at the top of the TR all the equity is sold;
· Set Buy Parameters in such a way that approximately at the bottom of the TR all the Reserve is used up;
· Apply the Trade Filters when price behaviour warrants it and switch them off when volatility between the TR limits gives reason for that.
Problem solved.
In this approach one can decide to adapt the sell aggression factor upwards as prices rise and adapt the buy aggression factor upwards as prices drop. This is a more difficult thing to do than just keeping the trade aggression factors constant.
But the market approach / system family that AIM, Vortex, Money Spinner, and my system belong to are still a well-kept secret with most of the investing public, and it could really benefit them.
I feel that this reflects the general way societies function. . .in it various groups develop their own particular Pet Systems based on
some basic principles that they like and then they promote it, effectively or not, and then the systems that are promoted in the best way become more or less the standard.
I have heard so often, time and again, that Microsoft developed a lousy computing system but I am stuck with that now.
Most Investment systems work AIM-like and it is in the operational sphere that there are "camps". . some people are lured to buy a Wall Street system and others to buy a Vortex AIM System (or are advised to use a certain technique). . . and again it depends on the selling technique "which or what" becomes main stream.
I am a terrible Seller. . I spend my time "tinkering" on the nuts and bolts and the levers and the colour of the buttons but how to market my products effectively escapes me
I am not investing anymore so I tend to avoid getting into the forum discussion on nitty gritty market details.
Thanks for your remarks.
FireBird/Clive/Anybody,
What a crazy mess!
I have lived for 66 years so far and it appears to me that it has always been a crazy mess right from the start. Possibly, . . .just maybe. . .this crazy world is the best there is, but if so I would hope the Euro and open borders remain, rather than that we return to each having our own currency and having closed borders and currency exchange offices at very border. . .
When there oppression some place we scream about human rights being trampled and if things get "out of hand" we invade the place to bring peace and liberty while the blood flows through the streets. Then after "peace" has retuned and all appears well (for a moment while we clear the rubble and build monuments) we start screaming bloody murder about high taxes and too many blacks and foreigners that are on the dole and should get a kick in the butt, go to work and contribute [to the crazy mess]instead of riding our coat tails and then we complain about grabbing politicians that have lost touch with reality and then we get really upset about the religious Tea Party fanatics that want to return the country back to the Middle Ages while the Coke Party wants to. . .ehhh. . .well, I forgot what they want . . .and then we have the Wilders Party in Holland that wants to give people with silk head gear a fine(Rag Tax) and then we have. . .ohh, what the hell. . .
It's a crazy mess all over. . .
It's so good to know that there are people like David Attenborough and many others like him to show us that amidst the craziness there are also beautiful and magnificent things to see and to experience, and to be reminded of the great things people can achieve. . .now and then. . . or actually. . . that this happens rather often.
Oh shucks, I forgot lunch time!
Hi Praveen P,
I read your interesting message on the AIM Forum and that you have system that might be called an AIM-derivative or cousin, and you mentioned the Money Spinner.
I got a copy of The Money Spinner in 1980 just when it came out and it led me to Lichello's Book. I too did not like various aspects of Standard AIM and TMS, and developed my own derivative of it: Vortex AIM.
I have not read all your messages but I will look at your example more closely, now that I know about your Forum.
Regards,
California Debts, or Deficits. . .
Sound just like the discussions in Europe
What to do with Ireland ???? 30# Deficit. They need a bailout but are not yet accepting it. .I am not sure a bail-out has actually been offered but there is plenty of talk about it:
Same arguments as for California: If one State gets it then why not the others?
Greece got bailed out, so why not Ireland?
Maybe you can blame Arnold for the mess?
I have not heard him promise: "I'll be back".
Maybe because he has not gone yet?
Hi there, Adam! Quite interesting pont. . .but. . .
. . .I took one of my AIM spreadsheets (CGNX) and added $2000 worth of shares on 3 subsequent days keeping the share value the same. So I added 2000 to PC and added 2000/(share value) shares to the number of shares held.
I am not sure I "get" this: A)You mean you added $ 2000 worth of equity at constant share price, I assume, and B) you added $ 2000 to the Reserve and updated the PC with 2000. Right?
This is what was suggested by. . . .
What happens is the PC/share went up, not by much but it does go up. PC/share is the centre value around which AIM trades. So ironically the effect of adding stocks in this way (outside of the AIM algorithm) has the effect of making AIM want to do more buying.
I think this makes perfect sense. Normally the PC-value and the Equity Value(EV)and the Reserve are not the same. So if you add $ 2000 to the Reserve and to the PC as well as to the EV then all three are increased by different proportion. So the (PV-EV) change.
For Standard AIM
(PC - (s+1)*EV)
= Trade Advice (or something like that), would change at constant price. Normally with standard AIM you have Residual Buys and Residual Sells and the Standing Trade advice would change. This is logical.
What I proposed in the first instance is to proportion the $ 4000 total in such a way as to achieve the correct CER Value that one would want after adding the extra money to the Portfolio. . .thus combining the money and stock addition with a Rebalancing, as this rebalancing would occur from time to time anyway!
It would then not make any difference if you add the money at a constant share price or not, as the prime focus action is to proportion Cash and EV to what you want! This amounts to actually Resetting the Portfolio as if it is a New Portfolio.
In this case you get:
PC(new)=EV(new). . . . . . . . . . . . . . . . . . . . . . . .after the new # of shares sreadded
CER(new) = Reserve(new)/EV(new) as you want it. . . .after the other portion of cash is added to the Reserve.
Del(R) + Del(EV) = $ 4000
One can calculate this or simply ad the Del(R) + Del(EV) experimentally till he CER is as you want it. Then you simply set the PC=EV.
In this case the AIM algorithm will exactly do as you wish. . .provided that you may also might want to change the value of the Minimum Trades. . .as you now have a larger Equity Value to work with.
I think that would be an ideal way to add the extra dough. . .a small amount or a large amount.
How does one cancel a post after it was activated but within the 15 minutes provided to edit the text?
>OT< TF
OK Thanks.
That is three more posts, including your double post!
End of OT
Over & Out
Adam, how do you figure that?
Hi Alan, I think if you keep adding to an AIM program it will upset the algorithm
If the adding is done approximately using the Minimum Buy Value and one keeps the CER as one would want it at that time then a rebalance would occur at the same time. The AIM algorithm would not feel upset at all.
When receiving smaller amounts of cash regularly then it is simple to wait and invest the dough in a savings account or in a "vehicle" that is designed for buying small amounts of equity at a time.
Right?
We've not gotten to 100,000 posts yet, and given the current rate, both you and I will be dead by then.
So let our AIM-descendants give it a name.
There are just a few more than 67000 posts to go yet, so at the current rate of about 33000 in about 9 years it will take between 18 and 19 years.. . .that's no so long!
I will be only 84 or 85 when that time comes.
I will start writing more post right as of today @ three times as many everty day as I was planning to do. . .that way I get 3 times as many responses as now, plus a lot telling me to shut up. . .That will speed things up!
That way we will get to 100000 in 2013!
Grubs must be Quantum Jumping
Funny that you should have mentioned "Quantum Jumping"
Have you ever heard of a "Proportional Jump" ????
Recently someone here referred to Quantum Investment, which incidentally is terminology I used for explaining AIM InvestingJ
Specifically I just happen to read my Post # 801 when perusing through some of the old discussions and I used the terminology on this forum as well:
>>If your sell packages have been too small you might have suffered a loss due to high trading fees. What you call making a 10% profit on a few shares requires that these few shares must be larger than the minimum trading quantity(I call that a quantum)...the idea of a quantum derives of course from quantum dynamics in which displacements and energies can not take place in quantities smaller than a quantum. I think that this analogy is perfect: AIM Trading "cannot" be smaller than a quantum. Obviously the Minimum Buy/Sell Order is the same thing and you should make sure that you trade values are larger than that.
With regards to the dilemma of running out of shares if a big stock price rise occurs this is precisely what AIM prevents. As the price rises you sell progressively less shares for the same QUANTUM that you sell(value of the Sell). This conserves the number of shares at a high stock price while you reap the profits.<<
The essence of AIM is in effect that each investment is a quantum and can value package could be considered unique . . if you would track with an ID #, like is done in Forex Trading., then you could sell each package after it has gained enough profit. In effect THAT is the way AIM operates although the packages are mixed up in the pool of shares. Not long ago Clive proved. . or at least he asserted it with enough authority to convince me. . .that keeping track of the packages and selling them, on the basis of a certain argument by their ID#, makers no difference in the long run.
On that basis I also dropped the attempt to define my Forex Trading on Vortex-AIM-Excel on Lot Numbers. . . It proved to be impossible for me to do that in Excel anywy!
<I did once grab a post but you did not put me on your List!
What happened?>
Not sure. Which Post was it?
Actually it is not important but I got curious anyway.
Well, in the early days I had post # 800. I think that may have counted as a grab in those days, or maybe I got one that later on that was shifted down because of a deleted post or so.
I was on the forum earlier than that because on Post 799 I reported "I am Back" after having been "away" for a while. It was the time I was setting up Vortex AIM.
After that I was on posts 1600/3800/5300 and then I stopped checking, realising that the grabbing only counted for X000. upward from 1000.
It's water under the bridge but its fun to read those old posts when much of the discussion was on the "mechanics" of AIM rather than market behaviour.
Good Old Times
Truth be told the only software you need is a #2 pencil and some paper
I would say this is paper and pensil stuff is pure hardware. Don't forget to add an erasor to correct mistakes. . hahaha
The AIM software should be in the head this way!
Grabber, As I looked back at these post about then the # 11111 Post just happened to be the next one. . it was not a "grab" as much as a lucky "hit".
"Quint-Uno" you called it.
But why was # 1111 not called "Quartro-Uno" ???
and # 22222 not "Quint-Dos"
Just kidding!
Anyway, I did once grab a post but you did not put me on your List!
What happend?
Maybe the same as on post # 19997. . . .You seemed to have been under the impression that it was post 20000, but that post was grabbed by Tom! . . . Maybe the some posts less that 20000 were eliminated by Tom, so that everything shifted down!
The post I grabbed and got a SDT for was # ????? I can’t recall. . .ages ago!
OT Tom,
"hazzardous material"
I just have to make my own Limonchello. . .it appears rediculously easy to make!
Hallo mille01652,
My opinion is based on the fact that the Original Lichello AIM has been "modified" by various derivatives and all sort of deviating ways of setting SAFE and even to modify the PC One of the much talked about subjects is Rebalancing the Cash Equity Ratio(CER) now and then.
As the trading progresses the original CER will change drastically. Often it is then useful to rebalance the CER and adding cash is a good time to do so.
So, I advice this:
1 When you have cash to ad calculate or determine the CER you want to have at that moment. . .use whatever rule there is for that. Assume that you would at that moment set up new AIM account.
2 Calculate on the basis of that CER how much shares you need to buy. . or simply add stepwise amounts of cash and equity till the CER is what you want it to be.
3 Then look at the PC Value and set PC = Equity Value, and ignore any Trade Advice you get at that point. . .you will get a negative Residual Sell Advice =(PC-(1+s)*V), which probably is lower than your Minimum Trade anyway
This way you have essentially a NEW AIM account precisely as you want it. You have dome the Rebalancing while having added to the Reserve.
If you simply split the cash 50/50 cash and equity you will change the CER as normally the cash and equity will not have the same value. You might a well do the rebalancing as I suggested right at that moment
Serious Business Proposal:
AIM/Limonchello Wizzard
I propose that when I get to post # 33000 and I am able to grab it for s grab, you send me a bottle of Limonchello!
Li(mon)chello . . .hahahaha, that is a good one. It sounds to be great stuff.
I AIM to drink Li(mon)chello any time I get a chance
By the way, my nephew Olaf in Brussels makes this stuff too. His wife Cinzia is Italian!
He uses lemon peelings, soak them in 100% ethyl alcohol!
Then adds 100% sugar and a smidgen of water to make the sugar dissolve. It is kept in a freezer and when he takes the bottle out to pour a drink the bottle has frost on it in no time!
Tom, my nephew’s stuff sounds as if it is the same as Limonchello!
Hallo Adam,
There are many ways of limiting AIM from burning up cash on the way down.
Of course, I am aware of that! Having been "peeking" on this Forum for about 9 years or more and "occasionally" having made a few remarks on AIMing (plus more ) I think was around here when the name Cash Burning was fist mentioned. I think it was either Lou Dino or Don Carlson. . .if it was not our AIM Wizard TOM himself.
By the way, Lou Dino. . .what happened to him?????. . was the one that provided me with a neat example of an Excel spread of my Vortex AIM program. . .I knew next to noting about Excel that time!
I liked the way Lou Dino set the bright colours for various fields.
In the years following I learned a bit about Excel programming and drastically expanded the functions in my program. I still am an Excel Dummy though. . .I know for sure. . .but I have managed to create some fancy conditional Excel statements that I hardly can understand as I look at them now. The use of Excel Macro's is beyond me!
So, I have seen all the Cash Burning Methods that were discussed here but I have forgotten many of them. The most important method advise I in my book is:
Don't buy any equity you are not sure about if it is worth buying, and then the "AIM Manger is the principal Agent to prevent burning cash”. . .I even advise that bailing out may be the best thing to do in certain cases, either on a rising or on dropping trend. The MACRO that Don Carlson proposed was specifically created to prevent cash Burning and I know that one perhaps better than anyone other than Don himself: I did the initial testing on his Delay Filter, which I gave the name MACRO while I was testing it on the Data Don provided to me. That were interesting times!
I've never seen a satisfactory solution to this problem- it's inherent in AIM, and for this reason I've moved away from individual stocks.
Indeed I agree that as long as one relies on any AIM to "solve" the unpredictable price behaviour of equities than one can be "cleaned" out rapidly, but his is an approach of letting AIM be a Robot that as Prime Manager does the trading. I maintained from my beginnings with AIMing that the Investor must be the Overriding Manager. . .Any AIM Trade Advice . . for a real investment. . .must be scrutinized before its execution. . .one can than prevent cash Burning and he cshould not blame AIM afterwards. When playing the AIM Game with historical data one can let AIM be the Robot and learn from what happens.
In the past (till end 1999) I have used the AIM general strategy with real investing for many individual equities with great results and incurred a few small loses at bailout Even with some equities that lost value on the average(Fokker Aircraft NV) I was able to bail out with a small profit when I decided to bailout when Jurgen Schremp told the Press he began to lost faith in his Baby” when the Dutch government refused to pump mote money in it.
select the right ones!
I am no longer AIMing real equities. Took a big financial business beating years ago and have no Reserve that I can afford to loseJ I trusted a friend and lost € 50.0000. Now I just tinker away with various ideas like exponential trade calculations away from the Midpoint of a Trading Range. . . .specifically how I could apply that for X and 1/X equities. Its FUN when there is no money to be lost!
My accidental way of preserving cash in the back testing of the ERX equity was quite surprisingly effective for the general parameter settings I use for testing equities about which I know noting. Then I try to learn from what happens when I optimise a run like that. I consider my Accidental Cash Preserver as something that may well be reasonably effective for all price behaviours. . .it kick in automatically as prices drop sharply. . .without looking at a moving average.
Something interesting happened
On my ERX Test Run I used the Cash Burn function in my Excel Cash Limiter spread at a value of 0,5 and noticed that its optimum value was 0,38.
I use the Excel PV Chart to see what happened when I started to use different Cash Burn rates. When I set the Burn Factor to 0 the PV exploded to a value of almost $ 45000 and the yield went trough the roof at 377% per year. The average invested capital dropped to about $ 3200 and that small investment produced a profit of $ + 24000.
I did not understand this so I analysed what happened: I had expected that with a Cash Burn Rate = 0 no Buys would be executed at all and that only Sells would Result, but examining the Trade Register I noticed that plenty of Buys were executed. In order to explain this I examined the Trade Execution Function. . .TEF
Thee TEF looks at the Trade Advice and the Cash Burn Factor and I discovered this TEF-thing was a lot smarter than I had expected. I had forgotten how I programmed it!
1. The TEF checks the Trade Advice and decides if it is a Buy or not;
2. If it is a Buy then it checks if the Cash is enough for the Buy and IF so it executes the Advised Buy for 100%.
3. If the Cash is less than the Advised Buy it is multiplied by the Cash Burn Factor to preserve cash level for buys at lower prices. . .
Brilliant!
If the Cash is beginning to run out the Buying is reduced as a fraction of the remaining cash.
With the cash Burn factor at 0 No Buy is executed if the Cash is Less than the Advised Buy. This means that as the cash runs out my AIM waits till the cash stack is rebuild after one or more Sells, and when the price drops again there is again enough cash to start buying. It seems then that setting the Cash Burn Factor =0 effectively reduces the number of buys and thereby increases the yield significantly.
It seems clear top me that this works well with high frequency volatility. Also when an equity price is diving there is no Buy Advise at the bottom unless the investor overrides it. That is a very good for not being advised to Buy. The savvy investor will know that the price has dived and he could override the this Cash Preserving function. . if he desired to do so.
The TEF is en effective filter to simply stop spending cash if cash is at a low level and forces the investor to examine the equity and its behaviour to decide what to do next.
What am I doing wrong?
I used the Image Function and pasted ab URL and eliminated the http://
http://www.facebook.com/photo.php?fbid=164795723542987&set=a.148839771805249.25092.100000376827032
As you can see the link works!
Anybody want to buy one high Resolution?
ANTI-AIM. . .cute name!
The part about "starting a pilot investment" may be the part that was most like AIM. But the "adding to the position should it show upward strength" is sort of Anti-AIM.
I agree! It is dangerous if one knows little about the equity. On the other hand if one knows the equity and has faith in it one can apply The Golden Rule:
An equity that is worth buying is worth buying when the prince is low AND it is worth buying when the price is high.
This is valid for AIMing as well when one considers starting an AIM portfolio.
For such an equity it would not be smart to wait till the price dives! It would be smart to start AIMing right a way and capture the rising trend, and if the signs are all on green it makes sense also to add more money in that portfolio.
Of course, IF the signs for the future prices were just as green at start-up time then it would have been better so start with a bigger stack right away and use a low CER!
Tom, I have used the information on the ERX Chart and took 36 data points and plugged them in my Cash Limiter Vortex AIM Excel Spread.
I have taken the position that I knew nothing of this stock and its future behaviour. I used a CER of 50/50 and $ 20000 start capital.
Here are the parameters I set arbitrarily according to my standard approach for unknown stocks:
Buy/Sell Holding zone = 10%
Trading Cost = 1 %/Trade
Yield on Cash = 2% Compounded every trade.
Cash Limiting 50%. . . this means that at every buy 50% of the Reserve is used (the standard aggression I use is rather high, so the Cash Burn was limited to preserve cash a bit.
Buy Aggression Factor = 0,75
Sell Aggression Factor = 0,5
[This means that Sells do not produce enough cash to build up the Reserve for aggressive Buys. As an afterthought on this rather horizontal average behaviour I might have better used the same aggression factors for selling and buying but I assumed I knew nothing about the future so I set the agression as I usually do]
The Results
1-11-2008
PV Start = $ 20000
10-11-2010
PV End = $ 34169
Net Profit = $ 14169 . . . . (expenses already subtracted)
Trading Cost = $2095
Interest Earned = $ 546
Run time = 738 days
Time Averaged Investment= $ 6935
ROTAI Yield = 101 %/yr
The average investment has been only about 35% of the $ 20000
start capital and the cash has earned its own interest, so the cash is considered as a seprate safe investment so it is not included in the Capital at Risk. This makes the yield of the invested capital rather high. . .indicating a rather effective Portfolio Result
This without any attempt at "fudging" to set the parameters at optimum values on the basis of future knowlegde. A lovely equity to AIM!
*********************************************
From the bove position I did a little bit of optimization by making small alterations to the aggression parameters, and against my expactation the local optimum is very close to the actual results:
The optimum Hold Zones = 10 % as assumed at the start.
The Buy Aggression Factor optimum is 0,77 instead of 0,75
The Sell Aggression Factor optimum is 0,50 as assumed.
The optimum ROTAI = 116%
**********************************
Now I set the system back to initial results(With the ROTAI=101 %)
and the Cash Burn NOT restricted to 50% of Cash Residue. This means that at the first price-dip from the start the $ 10000 Reserve is almost fully used up. . .due to the high Buy Aggression factor:
Results with High Cash Burn Rate(See note 1):
R0TAI Yield reduces to 57 %/yr.
From this it is clear that I might as well use a lower Buy Aggression and use no restriction on the cash Burn Rate.
I will try that.
Now the option to use even more restriction on the Cash Burn Rate. Logic tells me that for this case more cash would available for the dip on March 1st, 2009 at a price of 15.
Cash Burn at 25%
ROTAI = 98 %
Cash Burn at 30%
ROTAI = 102
Cash burn at 38%
ROTAI = 105,14 as maximum
Obviously with back testing like this one might likely be able to get a much higher yield than one will get with assumed best values for the parameters. The use of back testing has limited value as the consensus is that stock prices hardly ever repeat their historical pattern. The best I can think of for myself is to use a historical pattern for a reasonably short period back, do the back testing, then optimise the parameters. Then after a number of trades have been executed redo the back testing with the new prices and optimise again. In this way one would get approximately the right settings as long as the prices are not vary wildly. If they do then do not execute a weird trade advice but analyse first what is happening . . .”Is the weird price change explainable?”
Note 1
Having the Cash Burn restricted to 50% this means that I could reduce the Buy Aggression to a value so that only 50% of the Reserve is used up in the forst trade, without the Cash Burn being restricted.
I will try that but this does not mean that the Yield would then be the same because the trade point price differentials are erratically distributed. I will report the results.
Tom. . .On Your Cortex and Port and Liquid Investing,
I wish I'd saved that old article
Do you mean this:
http://everliquidaccount.blogspot.com/2008/10/definition.html
http://books.google.nl/books?id=mAlx1fBZByMC&pg=PA91&lpg=PA91&dq=ever+liquid+account&source=bl&ots=a5pzCYA1yg&sig=6x4rDMBqVccR0YHnPQe0IXJ_hOg&hl=nl&ei=-O7aTL2nGMLrObqsmb8J&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBYQ6AEwAA#v=onepage&q=ever%20liquid%20account&f=false
?????
I still have to read it!
But Quantum Dynamics are a reality!
I use it in my Vortex AIM!
Look at the Quantum Trading on
http://www.vortexcw.nl/welkom/index.html