is retired now but still kicking like a horse!
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Ahhh. . . silver and gold.
This must be great for people with a silver spoon and a goos that lays golden eggs.
Too bad I missed the Surge!
Hello Tommy:
The Ever-Liquid Investing Model
I went for it!
I am sipping a nice Port at this moment!
Having been at the keybord since 2:30 PM yesterday. . it is mow 0:35 AM or so. . . the liquid investing is a must!
Lovely story. . .especially the part of the Industrial Conrol System analogy for AIM. You and I at least apprediate that!
Thanks for the Course
What is our Home Work?
Are we going to find out how AIM does against my Cortex. . .ehhh. . . .I mean my Vortex.
As I read it your AIM did better than your Cortex!
Mmmmm. . . they made Port good!
McFuzzy OT(MFOT)
Most of what you say in that post is too fuzzy and does not relate to reality in any objective way.
It is like saying God=Love and God=Hate. Long Live The Folly
It means noting.
OAO
It's a Quantum Wave!
[Off Topic]:The Fuzzy Quantum Dynamics you are nudging towards are not a closed book yet.
Though as I understand it Dr. Hawking recently decided that everything came originally from nothing
Well, a lot of folks decide one thing one day and then they decide something else the next day.
I completely reject categorically the proposition that something can come out of nothing. I decided that one day many years ago but tomorrow I will not decide something else.
Any study of religion, without exception, shows a presupposition of an existing prime mover to get this chunk of "rolling along" universe we live in now. The proposition that that everything came from noting is simply a scientific article of faith, no different than any other article of faith. . .the can not be proven. . .Hope is the substance of faith
So, of all the things I have read about quantum mechanics(simply statements of how things manifest themselves). . . is something more comparable to kinetics. . . the book on quantum dynamics is not yet closed by a long shot. . .with this I mean the book on how quantum processes are driven to happen.
With this I do not mean to imply that quantum dynamical processes are driven by “hidden dynamical processes” in the classical sense but that quantum processes are driven to occur is beyond doubt. . . the fact that they happen is the evidence
When some guy says: "This woman drives me crazy" he does not imply something rational is happening . . .he just goes nuts!
It's not subject to explanation. . .it's quantum dynamics!
AIM is so simple I think it will bore Stephen Hawking to death. . he is already close to his end, so please don't ask him to bother about stuff like AIM . .it will kill him. . . he only likes Fuzzy Quantum Things like Strings and Branes to tickle his Brain!
Greetings from the The Sand Box
Hallo Karel,
I was checking some posts on my Vortex AIMing forum and ran into your name and wondered: I have heard very little lately from you on all the forums. Are you still active on the subjects or are you into other things?
I always appreciated your technical skills on the AIM issues.
I have been a bit inactive as well but now I am gearing up to be more involves on Vortex AIMing techniques and Inverse Investing.
This last is an idea for cases such as equities with values
X and 1/X
for example the UDS/EUR and the EUR/USD currency pairs.
Also I am trying to give more attention/exposure to TurboVest investing.
If you are still interested in such subjects I like to hear your opinions on it when I have specific aspects on my mind.
Like to hear from you.
Regards,
Conrad Winkelman
Grand Wizzard of AIMing. . .
Sorry. Tom already has that role nailed down.
What? Tom is a Grabber too?
So, OK, I propose then that we make Clive the Emperor of Statistical Wizardry, and give him a Crown!
Thanks Clive, I get it now!
It’s a piece of cake!
With some condensing I think I read this:
I just take the momentum of the conniption pin-range en put it in the Lane Stochastic Oscillator do-hicky that uses an "exponential finite impulse response filter" which represents the price volatility average of a jumping equity.
Then when
{complex formula that does not copy}
i.e. simplified ref. [8], tends to
{another complex formula that does not copy}
has the value of 3pi/e2. Then I buy a 32457 units of equity @ price 3,245 because the sample interval average has crossed over the Elliot Resistance point of the infinite sum of
{sexy formula}
approaches 3,678939 as N increases.
Shucks, why did I not get that right away?
Its so obvious!
I will apply it right after my migraine headache has gone
_____________________________________________
3 hours later (headache a bit less):
Clive, I am honestly grateful for your limitless effort to make me a little smarter, but I think it is to no avail. Between the headache pings I hear bells ringing and faintly remember some of the stuff in the links. . . which I run into after every 10 words. . .en which a new definition pops up or a new alien formula is presented. . .of course, I want to understand all the definitions and the nitty-gritty convolution integrals but somehow I get the feeling that I have missed a point here and there, so I have to read it all over again. . .well, maybe when my headache is gone. For now I have to take 5 aspirins to be able to go on
This stuff you refer to is 10 time more difficult than mechanical engineering mathematics. . .I almost failed to graduate in 1974 because I failed the horrible statistics course in 1973. . .I just barely passed the Re-Exam to be able to graduate later. . .somehow this stuff does not click in my head. . .probably a missing stat-gene in my DNA helixes.
I wonder how many investors actually are able to fathom any of this statistical abracadabra . . . I am surprised I did not run into the Chi-Square and X-Square Difference formulas here.
Sorry for the trouble Clive, I will never "get it"
Good evening/morning Tom Everyone, whatever the case may be on your end of the globe, with resetting clocks and all!
The art of stock selection can't preclude market risk or other nonMarket event risk. I think this is where AIM really shines
I am very amazed at the amount of effort that is put into the attempts to analyse how AIM responds to stock price behaviour and how one can use various means to improve its performance with or without AIM-derivatives. Tribute to all of you on that! I am really not qualified to comment on all these technicalities Tom adressed. . .my remarks will remain a bit on the "feeling part". . just two bits worth to add.
In spite of the supposed purpose of AIM to make things easy and to spend little time on investing I see the opposite happening. . .loads and loads of time are spend by many to try to figure out the Nano Mechanism of AIM, relative to every equity and Index that is traded in the world. . .and a lot of expertise is unloaded on it! I understand that you do a lot of studying on all sort of issues, possibly more than anyone.
I myself do that too. . .(as if that was not obvious already. . . in some limited way as well. . .witness my idea for the progressive trading amount as price migrates to the boundaries of the trading range and then trying to apply it with Clive's Ladder structure to an X and 1/X equity. Some people surmise that I have noting useful to do . As yet I have not figured out yet to apply Clive's Log Stochastic. . . whatever that means. . .to little time available(See PS Below).
Most of the ideas discussed on your Forum fly over my head. Interesting though is that progressive trading is not compatible with the current form Vortex AIM. . the progressive approach requires a variable Aggression Factor. . .a function of the price changes. . .so complex a thing I think it has Einstein confused Up There.
The point I was making. . . I believe. . .is that if as much effort was put into studying how companies perform and to find out their potential to become great winners could be determined then to AIM (or mot to AIM) such equities would be much simpler and the pay-off would be greater. . .most of the duds would be eliminated and more single stocks could safely be AIMed. Possibly using AIM would not even be necessary anmore!.
I am not examining companies anymore (other than the equity USD/EUR and the EUR/USD). . . neither am I doing any investing, but if I were I would dive into the operational details of the companies I wanted to invest in. I would do that before I would try to optimise AIMing their stocks. . .all the money I made with AIMing 10 or more funds simultaneously till about early 2000 was “AIMed” without making any AIM-calculations. I bought/sold on my gut-feeling and an eye on the process and did quite well. I am just playing on the technical issues now-a-days.
I appreciate your detailed remarks but it is not able to address them. . . the issues you mention also go over my head
By the way I think we should propose to make Clive the Grand Wizzard of AIMing. . . Einstein is looking down from Above and smiling because he understands some of what Clive does with his Magic as he applies it to AIM!
I think Clive should replace Bernanke as the next Chairman of the US Federal Reserve. . .I am sure then things will get better there a lot faster than it is expected to happen now.
Regards,
PS: I could not prevent myself to find out the meaning of Stochastic Process right away:
http://en.wikipedia.org/wiki/Stochastic_process
I am still not sure what to do with it
Tom,
I was about to hit the hay when I noticed your message. . .I am too sleepy at 4:30 AM to read straight even a short message!!!
I will get into it tonight or tomorrow.
Thanks for an in-depth response.
Tom,
That chart is indeed a beautiful example of how AIM would work well if one would stick with it (especially with a bit of Applied MACRO Filter) but also it is an example of a case in which loads of uninformed people would have bailed out 3/4 of the way, or more, towards the bottom and have lost a bundle of money, never to try AIM again.
Also on the idea of using stop losses and bailing out at a 10 % price drop and getting back in on the recovery after the bottom price THAT tactic would also have proved itself to be
the right thing to do. . .for that case. In this way the proponents of two quite different methods will point to an example like this to "win souls" for the method they believe in. In both Camps there are people that do well with their system and in both Camps there are people that have not done well at all with it. . at least when we consider starters.
I am an AIM believer but al the time I have pointed out that the key in this game is trying to understand thoroughly the companies or the mutual funds that one is investing in. Only then can one get the confidence to 1) stick with the investment even though its price is diving, and 2) know when waiting for a recovery before investing on the diving equity is the right thing to do.
I know that experienced AIMers do focus on that often but still I feel that this aspect of how to select stock gets less detailed attention here than it deserves. Is it perhaps a case that often once a starting AIMer has accepted the idea that AIM is specifically created for a person that has no time to study investment principles and techniques in a serious manner. . . in the light of the Lichello philosophy. . . that he will have condemned himself to remaining an amateur so that he will keep looking for easy methods to get the secret for picking the “winners” presented to him on a silver platter. . . my gut feeling tells me that this might be so, and that only few people can escape from it. This comes back to a proposition I have presented years ago: When people have come to learn how to invest efficiently they no longer need simple systems like AIM, Vortex AIM, or for that manner, ANY AIM.
I am sure no one will call me a heretic, no one will dump tar and feathers on me, no one will vote for throwing me out of the club. . .I just wonder if I am the only one that thinks like I do.
Hi Clacy,
Some years ago I posted this on a "Stop & Wait" Filter, of which Don Carson's MACRO is an example:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=1979676
When Don Carlson developed his filter he asked me to do some testing on it and after that I coined the name MACRO for him.
I do not have any contact information for Don anymore.
At that time years ago Don developed an AIM variant that was identical to Vortex AIM.
You have to have a secret decoder to read the text!
So if x are airlines I should use mining equipment as 1/x ? (grin)
2Fuzzy, I suspect that whe airline stocks are diving I see no reason why mining stock would start rising. I would rather think that mining stocks would dive as well then
The inverses would be currency pairs like USD/EUR and EUR/USD. I was AIming various of these in a haphazard way and then I started thinking running then parallel. The are each other inverses or at least very closely so. Without the leverage the volatility is not very high so with normal AIMing the profits are not very high. I AIM to increase the profitabilty with a srong progressive ladder structure that Clive explained some time ago.
I have started up a new USD and EUR inverse pair on Okt. 29 and have set the Holding Zone at 1%. If this does not create much action I will reduce it a bit.
When I see the X and 1/X system works reasonavly well I can run the trials on Forex with the leverage factor on it. I will keep reporting here what happens.
Clive, Investing is a bit like fluid flow control(Tom will like this )!
. . .the ladder is just a visual representation of the log stochastic and you might only trade at perhaps moving average cross overs or whatever signal you prefer. At which time you calculate (log(current)-log(bottom))/(log(top)-log(bottom))
I am with you on the basic idea of the ladder when starting at the Midpoint. Interesting here is that the "equal percentage steps" as you use them is very much the same as the function of an equal percentage control valve for fluid control problems: when the valve is closed for Step 0 Q=0. . . This appears to be somewhat like the d'Alembert system you refer to:
Step # and a 30% increase per step:
0; Q=0
1; Q=1000. . . this would be the midpoint for the ladder.
2; Q=1300
3; Q=1690
.
.
10; Q=8157. . .this would be an 18 step ladder for the full rangeup and down.
This shows a strong progression for the incremental flow Q (or investment I), at each step from the midpoint. In effect I am using this principle in my scheme although I used a different function for the increase.
One of my solutions to: "What to do after a price reversal?" was simply repeat exactly the same process. . .a sort of iterative system at the new position. The new midpoint position would simply have a different starting value and again I would have 5 steps up and 5 steps down. It appears to be the same as you are saying:
If we reset and start afresh then we have a ladder such as the one on the right, i.e. we've re-centralised with a new lower top and lower bottom price levels.
But if I have moved up the ladder 3 steps I am close to the top and with a reset I have again 5 steps to a new top, which would be much higher than the trading range. . .but on the way down I have 8 steps left to the bottom. For my progressive system I would have exhausted the Reserve in 5 steps but then I am not yet at the bottom of the trading range. It would appear that I would have to redefine the ladder to 8 steps down in order to take advantage of the progressive Buy Amount structure I have set up.
My system would be fine IF the trading channel moves upwards along the lines of my 5 steps to the top and the 5 steps to the bottom. . . . I am just thinking now of something. . . . If I monitor the movement of the trading channel I see after every so many moves where the new top and new bottom are going to be and I can always find a new midpoint for resetting the ladder. So in effect it is not simply to set the new midpoint position at the latest trading price but to use the new Reserve and new Equity Value as starting values on the midpoint of the new trading range. This way the ladder moves up or down as if its its midpoint is “fixed” stepwise to the midpoint of the developing trading channel. I think that may be a neat solution for the problem I face!
Clive, Is this actually what you are suggesting?
TooFuzzy, in the DST Department some brilliant people are hiding! I am hoping to pick some brilliant brains!
What if on a 10% rise or drop you sold or bought enough to bring the equity value back to where you started?
As it goes up you sell less shares(in each step) for the same amount of money.
On the way down you buy more and more shares with the same amount of money
Of course, that is the prime purpose. . .It is the AIM Principle. For equity X, after a 10% rise I sell 10% of the $ 1000 equity value and then a 10% drop occurred the I have $ 110 in extra cash and the equity would drop in value from 990 to 891. Then I am back at the starting point, but I have received 110 in cash. This is no different than it would happen in standard Vortex AIM. The $1 gain here appears small but is irrelevant. The point is that the 110 Sell would have been dumped right away in the 1/X equity that dropped in value. The $ 110 Sell represents a 0,1 share.
The value of 1000 for 1/X would have dropped to 1000*(1000/1100)= 909,0909 and the Buy with the 110 from the sell gives me 0,121 shares. So, for selling 0,1 share of equity X I have bought 0,121 shares of equity 1/X at the 9,1 % drop in value. . .that is a 12,1% gain in number of shares! If now the price of X drops back 10% the Equity goes to $891(=0,9 shares) and Equity 1/X rises in value from 909,0909(per share) goes back to 1000. That is a rise of 10% on the 1,121 shares @ 909,0909 each so its value = $ 1121 and the value of X shares = $ 891 for a total value of $2012. This is the gain for a single 10% up down cycle. So that is the typical AIMing gain.
OK this $ gain is only 0,6% but if that happens often then it accumulates while the share price remains constant on the average. Of course, one would hope that the share price swings all the way to the upper and lower limits frequently to get a much greater priofit effect.
So if it works out well I guess you eventually accumulate more and more cash that you have to find some use for?
Every time I sell X then I right away buy 1/X at the same time for approximately the same value as the Sell. This way the sale value of X is dumped into 1/X so the amount of shares is strongly increasing for both equities as long as the cycling occurs. So I do not build up cash. In principle I can do this without any cash at all. When I start with cash at the midpoint of the trading range I can buy extra shares for the equity that drops in value. I then buy shares so hat at the bottom of the trading range all the money is 100% invested. The question what to do with cash does not arise: I invest it up to 100% at the bottom of the trading range.
The only thing I have not yet worked out exactly is what to do after say 3 increases the price starts dropping. Then I have a ladder of 8 steps down to the bottom of the trading range and that ladder is different than I had before. My ladder structure is different than that Clive suggested. With my scheme I would have to make a new ladder every time the price reverses. There are some other options for me but I have not yet worked them all out. . . why make it easy if I can make it difficult
Clive,
Re: Ladder. A fuller example might help
I am still a bit puzzled on your Ladder System here.
I noticed that you have divided up the price spread 8 steps up and 8 steps down from the midpoint of the trading range. The steps in price from the top down are about 32,3 % to the midpoint price and again 32,3 % down from the midpoint to the bottom.
The price difference per step is 10,26016 % per from the top down. This price decrement from the top down has a near perfect fit with a negative exponential curve with the equation
Price Decrement= 188*EXP(-0,0491)
With a quadratic curve I get a near perfect curve fit too, the point being that the price decrement (or increment as the price rises)is slightly non-linear. OK, I am not questioning the reason for this as the price changes for the ladder could be made arbitrarily more or less non-linear. . .This apart from the Buy and Sell increments per step.
I am using a much stronger progression for the currency pairs X and 1/X experiment I am running.
My question is: "Do you use the same ladder for the rising prices as for dropping prices or could you get some advantage for using a different ladder for buying and selling?". For example using 10%/step for the price rise and 15% for the price drop?
I have a 10-Step Ladder set up this way for the selling:
At the midpoint I have say 10000 Equity and if the price starts rising 10% the equity is worth 11000.
I then make up a progression list for the selling off the equity at each 10% price step relative to the midpoint. Suppose I start with selling 10% on the first step from the midpoint:
Sell = 1100
Equity Residue = 9900
On the next step up of the 10% Ladder up I sell say 15% of the 9900, and so to the top . . .at the last step I sell 100% of the Equity Residue and have a new Reserve value. . .say 25000.
Apart from the fact that you calculate the price steps @ 10,26 % from the top down I calculate the 10% price steps relative to the midpoint of the trading range. I see this simply as an arbitrary choice and this should work just as well Right? In effect the 10% is the traditional AIM Holding Zone as I see it. The HZ is set arbitrarily and has no relation to the Trade Size.
Would you agree that this calculation structure for the Ladder is just as valid as any other?
As I use a strong progressive function to determine the trade increments they are small at the midpoint and become larger to the limits of the trading range. This I see as a more efficient trading than using constant trade sizes.
I have presented a 5-Step Up-Down Ladder general example on my Vortex AIMing Forum earlier. I just wonder if this works in principle the Ladder Idea is supposed to work(apart from how once chooses the progression of the trading).
I use 10% price changes and 10 steps on the ladder. In both cases the Reserve and the Equity are 1000 at the midpoint in that example:
***************************************
Buying for equity 1/X on a Midpoint Reserve Value perspective
Step x. . .% Buy. . . .Buy Amount. . .1000=Midpoint Reserve
1. . . . . . . . .10. . . . . . . . .100. . . . . . . .900 <-----Reserve Residue
2. . . . . . . . .13. . . . . . . . .117 . . . . . . .783
3. . . . . . . . .20. . . . . . . . .157 . . . . . . .626
4. . . . . . . . .38. . . . . . . . .238 . . . . . . .388
5. . . . . . . . .100 . . . . . . . .388 . . . . . . .0
Buy Percentage = 0,2999x^3 - 0,3645x^2 + 0,3266X + 10 (For 1 => x <= 5)
Selling equity X from a Midpoint Equity Value perspective
Step x. .% Sell. .Sell Amount. . .1000=Midpoint Equity Value
1. . . . . . .10. . . . . . 110. . . . . . 990 <-----Equity value Residue
2. . . . . . .13. . . . . . 142. . . . . . 947
3. . . . . . .20. . . . . . 208. . . . . . 834
4. . . . . . .38. . . . . . 349. . . . . . 568
5. . . . . . .100 . . . . . 625. . . . . . 0
Sell Percentage =0,6307x^3 - 1,5548x^2 + 2,4799 + 10 (For 1 => x <= 5)
***********************************
Depending on the trading range spread the step size (Holding Zone)can be any percentage that is appropriate for the equity. For this ladder I used the same trade size progression percentage 10, 13, 20, 38, 100. If necessary I can use a different function for the selling and the buying. In principle this is the goals for my using equity X and equity 1/X.
I would appear likely that the Up Trading would need a different curve than the Down Trading. You suggested a logarithmic structure to me some time ago. . .I have yet to interpret that for this scheme once I have the mechanics figured out.
Does anyone have any comments on this proposal for my Experiment?
AIMing Inverse equities with a Progressive Ladder Structure.
In my discussion on AIMing equities like currency pairs EUR/USD and USD/EUR. . or for that matter any two equity rates X and 1/X that function more or less like that my idea is to AIM them as a Linked Pair.. . .there is only one value X to deal with.
Rather than trying to create a formal algorithm one can simply decide that as one equity X is sold off 100 % of the Sell-value is automatically added to the 1/X equity as its value is dropping. Using the Progressive Buy-Sell example, which I have used in the previous post, this results in:
Selling equity X from a Midpoint equity value perspective
Step #. .% Sell. .Sell Amount. . .1000=Midpoint Equity Value
1. . . . . . .10. . . . . . 110. . . . . . 990 <-----Equity value Residue
2. . . . . . .13. . . . . . 142. . . . . . 947
3. . . . . . .20. . . . . . 208. . . . . . 834
4. . . . . . .38. . . . . . 349. . . . . . 568
5. . . . . . .100 . . . . . 625. . . . . . 0
Here the assumption is that at each Step the equity value rises by 10%. . .For currency trading this percentage might be 1 % or 2% as the case would dictate. This example is only generic.
The cubic equation for this progression for selling is:
Sell Percentage =0,6307x^3 - 1,5548x^2 + 2,4799 + 10 (For 1 => x <= 5)
(x is the Step Number)
and
Buying for equity 1/X on a Midpoint Reserve Value perspective
Step x. . .% Buy. . . .Buy Amount. . .1000=Midpoint Reserve
1. . . . . . . . .10. . . . . . . . .100. . . . . . . .900 <-----Reserve Residue
2. . . . . . . . .13. . . . . . . . .117 . . . . . . .783
3. . . . . . . . .20. . . . . . . . .157 . . . . . . .626
4. . . . . . . . .38. . . . . . . . .238 . . . . . . .388
5. . . . . . . . .100 . . . . . . . .388 . . . . . . .0
Buy Percentage = 0,2999x^3 - 0,3645x^2 + 0,3266X + 10 (For 1 => x <= 5)
If for example one starts out with a 50/50 Cash/Equity Ratio it is easy to see that in step 1 the Sell Amount for X is almost the same as the Buy Advise for 1/X . One could adopt here the easy way out and use the two systems in an “Equity Switch Method”. . that is the sell value from X is for 100% invested in 1/X. This is a very simple alternative for using two separate Trade Functions.
The advantage is that one does not need any Reserve at all. . . The Sell Value from X is the Reserve the Buy Value for 1/X. There is no need to have two calculations for trade amounts.
If the currency pairs EUR/USD and USD/EUR are used there is no danger that one of these will disappear easily and if it does there will be advance notice.
The alternative is that if a Sell of X in the 5th step occurs that of the 625 the 388 is invested in 1/X and 237 is used as a Reserve.
One can even use this with any AIM variant and with VOTEX AIM. You Trade the X equity in the normal way you are used to and the Sale value of X is invested in 1/X without Aiming this one with its own buy-calculation.
Sam,
I have been looking at the technical aspects of using the progressive Buy & Sell techniques using the ladder system I mentioned before. Here is an example I worked out on Excel that has some automatic features in it.
Buying from a Midpoint Reserve Value
Step #. . .% Buy. . . .Buy Amount. . .1000=Midpoint Reserve
1. . . . . . . . .10. . . . . . . . .100. . . . . . . .900 <-----Reserve Residue
2. . . . . . . . .13. . . . . . . . .117 . . . . . . .783
3. . . . . . . . .20. . . . . . . . .157 . . . . . . .626
4. . . . . . . . .38. . . . . . . . .238 . . . . . . .388
5. . . . . . . . .100 . . . . . . . .388 . . . . . . .0
Total invested = 1000 at a significant lower share price than at the starting point.
The Steps could be any fixed percentage increase in share price till the share price hits the Bottom of the Trading Range. At that point the Reserve has been completely used up. The percentage in the percentage column gives the progressive Buy Amount for each step to the top. You can see here that as the price reaches the trading range lower limit it get progressively larger so that it get invested efficiently. The progression is a the cubic function. Curve fitting shows a very close fit fort this function:
Buy Percentage = 0,2999x^3 - 0,3645x^2 + 0,3266X + 10 (For 1 => x <= 5)
At the Midpoint (Step # 0) y=0 by definition for the application. In this application I have not yet matched the Buy-Sell procedures to the Vortex AIM procedures as that would be a complex change I am not prepare to implement. The examples here only define how you would invest from the starting point of an investment on the basis of the price drops. In Principle the way Vortex AIM works is on the basis of an iterative structure. This means that after every trade the whole system is again in a starting condition, except the values of the quantities involved are different. This is the same for the Ladder System shown here. After a trade you can again apply the Buy Ladder in an identical manner. You have again a Reserve Value but for every step up the ladder as the price chance you increase the value of x by 1. The only difference is then that after a series of price drops the likelihood of a price rise becomes more likely. If that happens you revaluate the situation and the trading range appears to widen you can change the ladder to say 6 or seven steps up and down .
When at the start the price starts rising there is likewise a Ladder for Selling. I have used an identical ladder for dumping equity as the price rises:
Step #. .% Sell. .Sell Amount. . .1000=Midpoint Equity Value
1. . . . . . .10. . . . . . 110. . . . . . 990 <-----Equity value Residue
2. . . . . . .13. . . . . . 142. . . . . . 947
3. . . . . . .20. . . . . . 208. . . . . . 834
4. . . . . . .38. . . . . . 349. . . . . . 568
5. . . . . . .100 . . . . . 625. . . . . . 0
The cubic equation for this progression for selling is:
Sell Percentage =0,6307x^3 - 1,5548x^2 + 2,4799 + 10 (For 1 => x <= 5)
Total equity sold = 1434. . .an Average ROI=43,4 % on start investment, and a ROTAI=50% for the same period because the invested capital was averaged at 868. If the original 1000 starting equity value would have been left without selling any part of it the total value would heve been 1500 and the profit would also be 50%. This shows that with selling off the equity stepwise the %-yield would remain constant at 50% ROTAI, but the risk of losing the whole investment due to a sudden drop in value is much, much lower! That remains the great advantage of AIMing.
When the prise is rising then the rise-percentage for every step is entered into the functional relationship for calculating the Sell size. In this case above I have used 10% as the Holding Zone step size after each Sell. For example as the equity price rises 10% then the Midpoint Value of 1000 becomes 1100, and a sell of 10%= 110 and that leaves an equity value of 990. And so for the next step, each time you wait till the price rises by 10%.
The question here, in Regards to an Vortex Aiming procedure, is what to do if the price change does not go 5 steps in one run but reverses before the 5 steps are completed and the equity price is not at the Mid Point of the Trading Range?
One option is simply to wait out the reversing trend till the price is back at Midpoint of the Trading Range and us the new values as a new starting point. This would be the simplest solution as then you have again 5 steps up and 5 steps down for a repetition of the procedure.
Another question is what to do when the price has arrived on the limits of the Trading Range?
Suppose the price has gone 5 steps up and you are 100 % in cash. What to do when the price drops? At what point should one again invest if the first option (waiting for the price reaches the Midpoint price)is not desirable? The answer is simple: "At what price will the equity become worth buying again? From the price history one can see what the new Trading Range will be and you can wait till the Midpoint is reached and you can repeat the procedure.
The above procedures can be applied to clearly identified trading channels. If equities do not exhibit trading channel behaviour one is left to use common sense and on prognoses for the future. One would then better rely on methods that Warren Buffet uses (Analysis of financial statements and picking the right equities and then trade on opportune moments dictated by the market)
In regards to building the Ladder System with progressive Buy & Sell functions as outlined above these can not be build into VORTEX AIM without a complete restructuring of the Advice Generator. However VORTEX AIM is so flexible that you can enter the progressive trades that are recommended by the Progressive Ladder System calculation directly into VORTEX AIM. You simply ignore the Vortex Advice and enter the buy or sell you want.
In VORTEX. . .it simply carries it out the trades and the system carries on as usual.
It simply means that from the behaviour of the equity prices you calculate the progressive Trade Advice using a separate calculation scheme as I have shown above.
This method is possible when you are using the VORTEX Windows version or the VORTEX Excel versions. With the VORTEX Excel version you can simply calculate the trades on the same Excel Work Sheet.
The Progressive Ladder calculation is very simple. If it is not tied into the Vortex algorithms. It only requires a bit of extra manual work to run an Vortex AIM system that way.
Regards,
Wealthy?
Not really!
You must be very wealthy. You have way too much time on your hands!
Yes, but I am not reading Financial Statements anymore. The few times I did that n the past it worked great. I spotted the Dutch Holland Sea Search LTD and decided it had great potential (low operating costs and a lot of rights for oil drilling in the North Sea and close to Bengla Desh). I bought Warrants on HSS at around an average of $ 40 or so and AIMed these Warrants between $ 19 and $ 80 for some time and made a reasonable profit. Later this company was bought out by Cairn Energy of the UK. 3 years later the Warrants went to $ 125 and I sold a few, then they exploded to $ 800 and I sold a bunch and left a few sitting to see if they went higher. . . they did. . .they went up to $ 1500 but no sells. . . (it was an asking price only). The last few were sold at around $700 or so. We made a GREAT profit on that one.
Its too bad I did not keep stock picking like that but that was a choice. . I hated to read those reports all the time and quit doing it.
I am retired (66) and have loads of time on my hands, so I am not working and do only fun things. I have € 12000 in the bank. . . compensation from my motorcycle accident. . . and I am not investing it! Would you call hat wealthy?
Today I am going Indoor Sky Diving with my son Sean!
Thay was successful stock Picking
Warren Buffet. . .
Many years ago I read a report on Warren. He did read a lot . . but not books on how to get rich on the stock market. He read mostly financial statements every time he had nothing to do and that was most of the time. . his money was already working for him so he had a lot of free time on his hands. He was often flying all over the place and then he had nothing to do so he took 5 or 6 financial statements to read. . .(FS of companies he thought he liked) and then usually he found one in 10 that were great bargains . . .low price with lots of potential or already good earnings or a lot of assets that would pay off handsomely later. So the more of these bargains he bought the less he had to work, so he had more free time. In order not to be bored he went to visit more companies that looked promising and he asked the people there all sorts of funny questions so he discovered how these companies were managed, discovered their weaknesses and their strengths and again about 1 in 10 ware a great bargains with loads of potential, so he bought them, and again when he was flying around the world more and more he had nothing to do while flying so he read some more financial reports. Also when he was at home some times he had little to do so he always had a financial reports laying about to spend the time. I understand he ordered that there was always to be a fresh financial report on his toilet and one in his bedroom. They were supposed to be renewed very day. . he hated to read a report he had already read.
So now it has come so far the Warren has absolutely nothing to do any more and spends his time just looking for how to get rid of the money he has and he has also just found a guy that is going to fill his shoes when Warren quits doing nothing and is going to work in his garden. This new man does not know much about managing money. . .he only has managed $ 400 million so far but Warren thinks he will do OK because Warren recognizes a good deal when he sees one.
Learning from a book
There is something similar at work with all the self-help books on how to be come a millionaire and successful. How many people are like Tony Robbins?
There are millions of book on Management and Sales, yet good managers an good sales people are far and few between. I have read the book of Lichello on how to make A MILLION DOLLARS. . . . plus a few others on striking it rich in business. I am still poor and not a good businessman at all.
In those books it is claimed that one can achieve anything he wants to and that every boy in America can become President. . so far only 46 or so have managed to do it.
I became President once. . .without even trying. . . I won by one vote!
Aristle Onassis did not read any books in order to get rich. I read in one of my books that he was street poor and borrowed money to buy a good looking suit and started wheeling and dealing.
The story did not mention if he ever paid back the money he borrowed for buying the suit. . . he probably forgot. . he was too busy making deals.
People that read all the time have no time for making money.
Sam,
As I am not focussing so much on stock picking and more so on how to get things done you may well be right on that. I am not familiar with UUP/UDN. The more so because I am in Holland I look more at the locally traded equities. Next to that I focus on techniques and let others pick the stocks that most likely satisfy the ideal requirements for a certain scheme. Any Inverse pair would do.
Moreover with Vortex one can use a non-volatile equity and use high trading multipliers so that low volatility can trigger large trades
An example:
Use M=1. . . Trade =1*(PC-V)
PC= 1000
V=1200
Trade = 200
Now for the same equity and the same price change of 20% make M=10
Trade = 2000
If the equity has a good stable trading range you can capture a lot of volatility profits. However if the behaviour changes one should not blindly carry on trading with such a highly aggressive M-Factor. . .
The Manager. . .YOU. . . .should always decide if a recommended trade is justified on the basis of what the equity is doing.
Regards,
Hallo Sam! Good to get some feedback on this. I am a tinkerer so this issue has my interest.
I used to run models on QQQQ but for many years I have not looked it it and PSQ is unknown to me but I take your word for it that they are approximately inverses f each other but even if they are not then the inverse AIMing should still work.
I recently was reminded by Clive (Is775) that the Ladder Approach would be a good method for determining the trade sizes (once set op a plan to use exponential trade sizes increments. . .ideas developed years ago in discussions with Don Carlson. If one uses a mayor Currency Pair like the EUD/EUR and the EUR/USD there is no danger that one of then goes to zero, so the inverse trading method like I want to use for X and the 1/X should be good examples of what we are aiming for, for any equities that approximately behaves like that
1. As X rises and 1/X falls then both exhibit a trading range and the have a Midpoint value. From the midpoint we model the trade sizes on an increasing scale to go all in at the lower limit and go all out on the upper limit. This is the idea for both X and 1/X.
Possibly you already understand this from the previous discussions:
Trades follow some pattern like this as the rate deviates from the Mean 1, 2, 5, 10 or something like that, based on an exponential calculation or ant progressive function. . .the exact form is only a matter of optimisation. W could even start the modelling a function like Trade =ax with x being the price difference from the mean value;
2. Standard AIM had a little different structure than Vortex but with both there are variables to have control over the trade sizes. The main difference between AIM and Vortex is that in AIM one does not recalculate the PC. This means that for AIM if the trading changes from buying to selling there is a sort of dwell which cause the selling to be delayed as prices rise. However, Vortex can also do this simply by using a larger holding zone for rising prices. The advantage of Vortex is that the Residual Buy in AIM is eliminated;
3. Updating every week: I have never paid any attention to using a special timeframe for updating. I used to look at the stock market every day and if it moved so that Vortex gave me a trade I did the trade. . this way I capture volatility but also if the trend is up one tends to sell too quickly. This I can arbitrarily suspend if I have some expectation that the rise will continue. . .The more I know about the equity the better I can respond. This always creates controversy in the AIM Forum. My philosophy is that if I know a lot about the equity the less I need AIM. However Vortex is created also for people that want to play safe and want to use Vortex to update only every month. Vortex can be adjusted to be simply a Buy & Hold Manager. Something for everybody;
4. The split of a QQQQ sell into 20% cash and 80% PSQ would be a personal choice which would make sense if you do want to build up a cash reserve if you have a worry about PSG becoming a deep diver without coming back. In my X and 1/X equities I am not considering that unless an optimisation of the system does not create the same size for the buy as the sell . With the Dollar and the Euro I would in the first instance simply match the trades Sell(X) = Buy(1/X). If for some reason I would feel that I need some cash I would simply add new cash to the portfolio. . . .For Testing this would not be a problem. In real life it could be that this is not an option and then a more conservative setting is needed and to build some cash might be an option then;
5. You appear to see this inverse AIMing as some thing different than regular AIM. I do not see it that way. With a single equity one would AIM in such a way that the trade sizes are “suited to the occasion”. . . meaning that you would try to make the trades optimum. . either by way of a gut feeling on the one hand or by some optimisation package on the other hand. . . you would do the same with a second equity. The logical thing then to do is to match the trading amount of the two equities so that they optimised as a equity pair. If an ideal optimisation is carried out for this then it is still regular AIMing but with added know-how for the best trading technique as compared to AIMINg without this know-how. . . .Is the AIM Forum not primarily focussed on discovering the best trading methodologies? Of course it is. That there is little animo for actually finding optimum methods for inverse equities is due to the fact that a lot of AIMers do not like tinkering like Clive does. Clive often presents great ideas but they are somewhat complex and time consuming to implement, so most AIMers wont do it, or they say the extra effort is not worth it. In many cases that is quite true!;
6. In regards to Vortex: Its too bad there appears to be bug in regards to systems that are being run in the USA. .In Holland we have no problem with running Vortex on XP. That is what I use. Chris Kruidenier sespects that is has to do with eithet viruses or Incmatibilities with US Based computer systems. He susgest to run HiJack This virus removals. In case you have not discussed your problem with him please contact him on:
http://www.ckweb.nl/index.php
and let him try to help you get Vortex going;
7. In regards to Vortex being better or not than regular AIM. I believe it is. In many Competitions we ran on this in the past Vortex runs usually ended up with a significant better yield the AIM runs. The only system that performed very similar to Vortex was the system developed by Don Carson. After discussing the details of out trade calculation it was discovered that Don’s system was in principle identical to Vortex. Both systems used this: Trade = M*(PC-V). The only difference was that the value of M was calculated different. The system Don used was actually a function that was based on the Trading Range Upper and Lower bands. In essence Don already used a progressive function: as the price moved towards the limits the trade sizes increased automatically. . .more or less as in the Ladder System proposed by Clive. This results in a buy & sell response that is more closely resembling only trading at the limits of the trading range.
As of now I have not been spending much time in actually creating the mechanism for the perfect algorithm for trading X and 1/X. As I mentioned I am already running the x and 1.X with the USD/EUR and the EUR/USD currency pairs but I have not yet liked the trades. Also the runs do not have an identical starting date so that are not really comparable 1-to-1. What I use is the following for both equities:
Buy Holding Zone = 1%. . . . . Buy Aggression Factor = 0,95
Sell Holding Zone = 2%. . . . . Sell Aggression Factor = 0,70
These settings are intuitive and they are not linked yet, so I am AIMing the two individually against a Cash Reserve for now. The selling is delayed relative to buying. So the price change is double for triggering a sale. Buy aggression is larger but it occurs on smaller price changes. I intend to use an exponential trading structure make the trades progressive. . that is for a given price change the trades become larger and larger as the price moves away for the mean. This ad a complexity in the programming which I have not yet managed to complete.
I hope this gives you a idea what I am doing in this. For your QQQQ and the PSQ I would also try to use a progressive function for the trades as the price moves away from the mean. You can do this manually:
For example you can divide the mean to the limit in 4 steps and decide to invest the Reserve at the mean 100% in the 4th step downwards in the following steps like so:
Reserve at the midpoint = $ 10000. Suppose the Holding zone = 20%. The equity rate would drop to a value of 0,24 =0,16 % in 4 steps. This is of course extreme but this is only an example to illustrate the idea:
Step Equity X
1: 5% = $ 500
2: 8% = $ 800. . .invested 1300
3: 20%= $ 2000 . .invested 3300
4: 67%= $ 6700 . .invested 10000
Thus the $ 10000 cash would be fully transformed into a large number of low cost shares.
On the rising value of the equity we would do some thing similar, but then the total value of the equity at the mean value to be sold off with 4 steps. The difference here is that the value keeps rising as we go, so the calculation would be different. Assume the midpoint value of the equity is € 10000 and after the first rise in the rate it becomes $ 12000 and thereafter a sell occurs at each 20% rise:
Step Equity 1/X. . . Value left
Midpoint. . . . . . . . . . . $ 10000
1: 5% = $ 600. . . . . . . $ 11400
2: 10% = $ 1368. . . . . . $ 10032
3: 30%= $ 3612 . . . . . . $ 6420
4: 83,34%= $ 6420. . . . . $ 0
Now, this is still an arbitrary example one would AIM two equities separately. If however the two equities are X and 1/X are AIMed there should be a match between Sells and Buys. It is obvious that the calculations become rather involved and should be automated. In this example the 4th step of the selling . .the amount of $ 6420 should be used for the 4th step of buying above. You can see there is an approximate mats in these example already. In the actual execution it would not matter that the sells and buys are calculated exactly equal. One would simply make them equal or the difference can be set aside as a reserve or one could add a bit of cash if there is some shortage.
I have developed these figures “on the spot” here using some Excel calculations for modelling the trades. From this it is clear how I am planning to model the trade relationships between the two equities. For the QQQQ and the PSQ I would do an identical modelling. Then after it runs I would attempt to optimise it. . . The optimisation would be difficult as this requires a formal mathematical technique I do not master. In practice it means I would have to be satisfied. For the time being, with an arbitrarily devised trading relationship. As long s it is progressive with price change it would function quite well, I am sure.
Regards.
A Fuzzy Issue
Hi TF, you, if anybody, must love this fuzziness. All the experts use their pet term, as I see it.
Not long ago I read an article on "Asset Based Lending". In my Turbovest Methods I called this sort of lending many years ago already "Equity Credit Lending". I suppose the difference is that some people would bundle the value of their houses and buildings under Assts but not under Equity or Capital. This type of fuzziness also appears in technical discussions that are not formal scientific or engineering papers. In this field one expects, without exception, that at the beginning of the presentation a list of definitions is presented.
In informal financial documents/discussions this does not appear to be practice just as it is not practiced with informal technical documents/discussions.
TooFuzzy: The Amazing Shrinking Account
I do not any difference between a Shrinking AIM account(in terms of # of units) that is run against a Cash Reserve that is growing, and a Shrinking account that is run against a Expanding account. The crucial question always remains if we should, or should not, keep selling off equity that keep rising rise in value. . .(Killing the Goose that lays the Golden Egg)
The other crucial question is if we should keep buying into equity that is dropping in value. If the answer to both questions is YES then it means that one is satisfied having taken the profit and invested it in the low priced equity(which then is judges to be worth buying). These decisions stand on their own and are not decisions that are derived for the AIM structure.
As you of course have already realised, when neither of the two equities are in danger of diving to zero there is not much to worry about. The question becomes only important if the danger of collapse becomes real and then one needs to take intelligent decisions. . .not investing in a worthless equity!
All these possible extreme scenario's are not of any consequence in my search as to how I can optimise the buy and sells orders between the two equities that have an inverse relationship the bob up and down in value.
When it is time to bail out then the trading methodologies that were used are no longer applicable anyway.
Hi Aimster: On sleepless nights
If one selects several individual stocks after a serious selection procedure, say 10 good equities, there is no need to have sleepless nights. Each one of them has a good chance of giving great yield. One is still diversified in that case but diversification was not the principle objective. 10 good choices were the objective.
Having said that it should be clear my remarks were not meant to advice against diversification but against diversification as a principle objective.
Tom, on Diversification. . .
Again, I think diversification is key even in currency AIMing. Owning and AIMing as many of the major currencies as possible would be best.
Generally, considering the initial AIM-philosophy of spending minimum time and creating a considerable amount of safeguarding your advice is a good one for working an AIM Portfolio, provided sensible ground-rules are respected. For running a Portfolio on the major currencies I would agree with you. There is however is a danger in this “diversification advice” which I have been "pounding the streets" with ever since I got involved in AIMing and which I have highlighted in my writings on investing.
Some Money Managers advice diversifying under the erroneous contention that this would aromatically maximise profits. They say: “Investing in a single equity is dangerous” while they do nothing on selecting winners for their clients. In fact they let the client select the equities and when it ends in disaster they wash their hands of it.
Diversification into 10 or 20 weak equities. . .well, let me put it more bluntly:
Diversification into 10 or 20 losers is guaranteed to result in losing money rather than being a good strategy. The argument that diversification will diminish the effects of one equity losing value (or disappearing) is of course true, but that argument alone is not the "saving grace" if equities are bought without due care for their winning potential in the first place.
With beginning AIMers the argument that one does not have enough time to search for the best performers tends to result in careless equity selection and at best results in running neck on neck with the index . . .or only marginally better with a bit of volatility capture.
Currently the expertise available on this Forum should be enough to advice on the importance of stock selection based on a serious personal study of the equities involved. Only then can one pick the winners and create excellent profits and credit himself for the profits rather than on being lucky.
Let's not forget the importance of studying the reasons as to why equities can grow in value and why they exhibit volatility. Then one can pick winners that ALSO have great volatility and beat the stock market by a mile. . .ahhh. . . I should say: "by 3 kilometres” instead
Yes 2Fuzzy, correct you are!
This is of course like the ENRON Scenario. . .except for the collapse of a country one can see it coming, like happened more or less in Zimbabwe not so long ago. . .the old ZIM $ was completely taken out as it became worthless and they created a new currency. . .I even forgot wat it is called. Somehow I do not think it is the US $ they use now.
In El Salvador they switched to the US Dollar some years ago as the Colones were eliminated although there the currency did not colla[pse to near zero as happend in Zimbababwe.
Thanks Clive!
You are triggering my memory with this suggestion. I remember our discussions on your Ladder System and the idea of progressively stronger buys as the price dropped to go all in at the bottom of the trading range, and similarly the opposite thing at the top of the trading range(all out).
You'd need to use a log function Conrad i.e. if on one side the price gains 100% (2.0 gain factor) and on the other it loses 50% (0.5 gain (loss) factor) then log(2) = 0.3 and log(0.5)= -0.3
(log(current)-log(bottom))/(log(top)-log(bottom))
Somehow I feel this is very similar . . possibly exactly the same. . .as my idea's years ago to use exponential trading factors relative to the midpoint of the Trading Range (Since logs and exponentials are inverse functions).
I will look into these ingredients and see if I can bake a cake with it
Hallo 2Fuzzy!
Are you saying that as "X" doubles a few times it gets larger by a REALLY big number and at the same time 1/X after being cut in half a few times has very little to lose anymore? ( They can both start at 1 but after a few doublings X will increase by 10 but 1/X might decrease by 1/10 )
I think you understand it exactly as I meant it. I already do this with the €/$ and the $/€(Dry Running). Theoretically they would be each other's inverse but in practice they might differ a bit. I am asking the questions on this from a theoretical interest. . .If one ignores practical aspects then we deal with only one variable X, and I am sure that makes it possible to create a trading structure that is optimum for both equities. When I start at a base of X=10 and 1/X = 0,1 then when X=5 then 1/X = 0,2
If I look at the point X=10 and I fear a drop in X then I can sell 1 unit of X @ 10 and buy 100 units of 1/X @ 0,1. Then the 1 unit sell of X gives me 100% Profit on the rise on the 100 units from 0,1 to 0,2. So if I use the AIM strategy, as I would, then I would sell the 1 unit at 10 and buy the 100 units at 0,1. So I would use the simple AIMing technique in a normal way to make a good profit. That of course I know. The real question is how to optimise such a technique.
Clive has giving me some interesting suggestions for that with his Ladder Technique. In the past we discusses that in depth but I did not think about that in this context. Thank you Clive!
So theoretically I think you are right (if I understand correctly) but practically no. You can always AIM both separately.
The idea of AIMing both is clearly what I am already doing in the Test Run. Still this would implicitly mean that there is some connection between the two managements approaches. If you would manage the X and the 1/X without a predetermined algorithm you would still see a pattern emerge in the trading of the two systems because there is a common cause for the buy-sell signals (Del X and Del 1/X))that the two AIM Systems get from the price changes.
My argument here is that the buy & sell actions CAN be optimised by a linking technique: If you sell 1 unit at X=10 then optimum buy for the 1/X= 0,1 equity is NOT necessarily to buy 100 units. It may well be optimum buy 150 units instead of 100 (or even 75). For the extra 50 units I need to draw the amount 5 from the Reserve, instead of simply turning the sell of 10 into new equity.
These two ways of responding in this example:
1) Turn a sell of X simply in to a buy of the 1/X: No Reserve needed. This simply means this algorithm: Sell[X] = Buy[1/X[
2) Turn the sell of the X into a leveraged buy of 1/X. The algorithm would then be: Sell[X]*L(Y) = Buy[1/X].
In this case the L(X) is the Leverage Factor as a function of the value change of X. . . .
Y =(PC-V)
The interesting thing here is that my Vortex AIM already uses such simple leveraging factors: Trade=M*(PC-V)
The only thing I need to figure out are the mathematical details of the function L(Y). I think the Ladder System that Clive uses will be just what the doctor ordered J
This Ladder Idea is very much the same as I had in mind years ago and never worked out: using an exponential multiplying factor based on the midpoint of the trading range. As the value deviates from the midpoint the trades become exponentially larger as the limits of the trading range are reached.
Clive,
In regards to my message
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=55793998
I am still chewing on the proposal to trade a currency pair X and 1/X simultaneously.
The interesting feature is that if X moves in a particular way we know exactly the value of 1/X. . .even when we correct for trading costs. . . (even if in practice the two currency pairs might not be exactly each other's inverse the inverse assumtion would simply provide a trading guidline for the real thing).
This leads me to think that as long and X behaves within resonable limits we can in principle determine an optimum trading method for switching between the two equities. It is in principle no different than having two currency deposits and switching back and forth on their relative weakness and strength.
Apart from my specific Vortex parameter structure for setting the buy/sell agression factors I am questioning if there is some fundamental reason that would prevent one from determining an optimum trading strategy for X and 1/X in advance. . .apart from possibly one's ignorance of mathematical methods required to do so?
I wonder if your deep insight in such matters can come up with the "saving grace" for my scheme!
Well Tom, you are certainly right on the question on the Cash Reserve. Had not thought about that in the "equation".
In this respect one would certainly need to consider this.
Back to the Drawing Board!
In my Models I have considered this from a practical pint of view:
In Holland one simply had an Euro Account. . .holding a Dollar Account is possible but that would not normally be used for purchasing(unless one is a big commercial operator). So if I would Buy the EUR/USD or the UDS/EUR my bank account would be in Euro's anyway. For someone in the USA his account would typically be in Dollars.
It is be different with the online Forex brokers. I appears that one can simply set op a Dollar Reserve and/or an Euro Reserve, but the broker would simply have a standard ways of crediting/debiting these Reserves.
The question thus is this.
Suppose I have two Reserves: one $ and one € account
If the EUR rises in value relative. to the $ and I sell a portion of the €/$ pair I would have to get the proceeds in $ because I get more $ for the sell. . .but it would not matter I think as the total value would be the same.
The same argument for the $/€ pair if this would drop in value and buying extra units can be from either the $ or the € Reserve.
Another question is what to do with the Reserve itself. If the € Reserve is relatively large and one expects that the € will drop in value then it would pay off to switch it to $. As the $ rises in value there is extra gain also on these extra Dollars in the Reserve.
In the other direction the same argument & same solution would be applicable.
This result in a procedure that one simply needs to consider what to do with the Cash Reserves in the light of expectations for the rate changes. This is not related to having bought currency pairs or not on the Forex market!
I think now that the buying and selling can be done from/to either currency Reserve. One simply has 4 investments in this case:
EUR/UDS pair
UDS/EUR pair
Dollar Reserve
Euro Reserve
and for each investment one needs to buy & sell whichever is the most logical choice, based on one's expectations of the rate changes.
A piece of cake!
Tom, I was just looking more to the intrinsic mathematical features for the X and the 1/X pair, and that cycling of X alone would create volatility capture. The 1/X would cycle as well and would also create volatility capture.
Its clear that if one currency would continue to rise in practice the other may rise as well s the rate remains unchanged in that case.
If however one currency would disappear then the other would not necessity become infinite but at some point the currency pair would be taken off the market. Of course then one can lose on that pair that has becomes near zero in value. I would say though that as long as a currency pair keeps cycling the AIMing effects of buying large quantities at low prices for the one while selling small quantities of the high priced inverse would create double volatility capture.
If this would pan out in practice remains to be seen.
Clive,
Is what you are saying in so few words the answer my question for the X and 1/X currency pairs?
My conclusion for the (X+1) and the (X-1) would be, I think, that they are ideal equity pairs, creating real gains as they cycle between +/- step changes for the value of X . . .they would mirror each other all the time.
For such a case my buy and sell parameters would have to be identical.
For the X and the 1/X case I am at a loss as to how to figure out the parameter settings for optimum performance.
At this time I would suspect that I could assume an up-down range for the value of X and then see what the relative changes for 1/X will be, and on that basis selects the buy-sell parameters.
Tom, Anyone,
What Tom is suggesting looks a bit like what I am doing in a Forex Test Portfolio.
I have both the USD/EUR and the EUR/USD in this portfolio to see its effect. At the moment I am not even sure I have the operational parameters the same. . .not yet sure how to get optimum setting on that(1). If that test gives a good overall performance I can start running it on an actual Forex facility
In this case the currency pairs are not leveraged so I simply have
X and 1/X running next to each other.
(1)An interesting issue here is that if X keeps increasing then 1/X----> 0 as limit (it approaches a horizontal line and when X experiences an increase 1/X does nothing)
If X keeps decreasing then 1/X grows rapidly -----> approaches infinity (as X goes to 0 linearly 1/X exhibits large stepwise increases). So, relative to the equity changing linearly the inverse is quite non-linear.
I have no idea here as yet how to deal with this strong non-linear behaviour for setting the operational buy & sell parameters in Vortex but I suspect the problem would be the same in Standard AIM if one uses different SAFES for the buys and the sells controls.
Is this "inverse behaviour" discussed previously on the AIM Forum? If yes, what is the consensus on running inverse equities in one portfolio?
PS: Obviously his is a different case than for equities that simply have generally a negative correlation. With actual shares there is never an 1/X relationship.
I can envision a relationship Y1 and Y2 that if Y1 rises by 1 point that Y2 decreases by one point. This would then have a relationship
Y1=X+1 and Y2 = X-1. The ratio of these functions is (X+1)/(X-1)
For the Inverse case the ratio X/(1/X) = X2
So for a reference case when the value of X doubles after a number of increases we get this:
Inverse case Ratio = 4
Other case we have the case that the increase of 1 now has the value of X, so we get
Ratio = (2X)/0 -----> approaches infinity as X approaches doubling.
This simply illustrates that with a fixed stepwise value changes for the functions (X+1) & (X-1) the decreasing function approaches zero very rapidly while 1/X in practice will never reach 0. I used this analysis to show to my self that these two cases are VERY different and can not really be compared for large value changes for a currency pair that is “AIMED” as an Inverse Pair.
Did I open a Can of Worms?
My picture in my recent post is not quite up to date.
here is a better picture. . it is also a bit out of date though.
http://www.facebook.com/profile.php?id=100000376827032
I will search for a more recent one but I am affraid that will do me no justice. I am not aging gracefully
Hallo Clacy, welcome to AIMing.
You have already received various reactions as to what a "contrarian method" like AIM might achieve for you but I like to add some special notes in regards to AIM that are not directly obvious but nevertheless are the key to strong portfolio growth and portfolio protection
Most general investment guidelines are the same for all investment types. For example:
1 Buy Low - Sell High. . . .without it capital growth is obviously impossible. It is nothing special, but AIM uses this rule in a respective systematic manner in combination with portfolio protection.
2 Buying in weakness and selling in strength is not really the same thing as in (1). "Buying Low" does not mean buying weak equities and "Sell High" does not mean selling strong equities. One of the rules of successful investing is this one:
A strong equity is worth buying when prices are low and it is worth buying when prices are high (This rule is the foundation of how Warren Buffet invests). Strong equities have strong growth potential but they are also subject to frequent price dips and price rises. With AIMing one can profitably select strong (solid) equities and select one with relative high volatility to cream off the profits from the price oscillations. This is an ideal mechanism for AIM. . . selling large portions of such strong equities when prices are high would be unwise (prices could easily continue to rise). Various adaptations to AIM are invented to prevent selling off your equity when AIM would advice you to sell off. All proficient AIMers protect themselves again this selling off good equity. In this case you could easily decide to ADD capital to you portfolio when prices are high!
2 Buying extra equity when prices are low is obviously a good strategy(See [1] above. . .which is the principal objective of investing). It is valid for any investment method:
When a price goes from 5 to 8 the gain is 60%. . .a child can understands this. . .every investor attempts to achieve this and in AIM this is no different than in any other type of investing. The price cold well go to 10 or higher. For this effect you do not need to start AIMing. Buying extra equity at a high prices is valid for ANY investment method if the equity is strong and the trend is rising.
3 The "secret" of AIM is not buying equity at low prices but to sell a portion of the equity at a "peak" price, then wait for the price to dip below its acquisition price and then acquire more equity. This method hides the powerful mechanism of AIM. First, as the price dips less equity is eroded in value! This is partial Portfolio Protection in case something unexpectedly bad happens. No different in principal then this is so when using TA methods. Second, it provides for the possibility of exponential portfolio growth. . .something most investors do not recognise this as the powerful “secret” of the contraries method. An exaggerated example:
Buy price = 10
Price rise 60%
Sell price = 16 for 1 unit
Price drop 40 % to 6
Buy equity at 6 f@ value 16
Number of units bought at 6 = 16/6 = 2.67
The Portfolio Growth that is created: for the 1 unit you sold with the profit of 6 at a value of 16 gives you a leveraged number of units back. This is a 167% increase of the investment base of 1 unit initially bought!
Price recovers to 10 again-------> Value = 22.67----> Gain = 12.67 or 126,7 % increase in value without any gain in equity price, relative to the starting price!
Price rises to 16------> Value = 42,67-----> Gain = 32,37 or 323,7% in only in one price drop-rise-recovery for an upward trend, as compared to a 60% gain for the Buy & Hold method.
The exponential growth principle develops if the up-down-up trading is repeated and it shows the secret of Portfolio Growth for AIMing, for as far as it pertains to the sell & buy trading fractions of the portfolio in the volatility pattern. Many people forget this powerful leveraging process that takes place as a result of AIMing.
When one can systematically stick with a strong volatile equity the AIMing Method can be very successful. The key here is that this -/+/-/+ trading limits itself normally to a relative small portion of the portfolio and in this way portfolio growth is a combination of price appreciation of the base equity + exponential growth of the trading fraction of the equity.
Recognizing this exponential growth mechanism of the trading fraction a proficient AIMer can manage his AIM portfolio in response to market trends. For example in a rising trend one does not want to lose the investment base from selling off. In this case one could well sell only small portions at peak price and buy an extra large portion on a price dip. . .essentially not only investing the value of the portion that was sold but also investing an extra amount of new capital in that dip. . .a valuable equity is worth buying any time, but it is more effective to buy it in a dip! AIMing provides that opportunity for systematically buying at the dips.
Adapting the regular AIM and to tailor it to the market trends obvious requires a bit more time and experience for its management but it also provides the powerful means to optimise an AIM portfolio.
A powerful method to accelerate portfolio growth is to typically create a skewed trading profile for a rising trend. . .this is extremely effective when one has extra cash to invest: For every $ 1 sold on a peak invest say $ 1.5 or $ 2 in the dip. This not only creates exponential growth on the $ 1 sale at high prices but also effectively invest new capital efficiently at “low” price.
Another cardinal rule: Never invest money you can not afford to lose! This is just as important for AIMing as for other type of investments that could depreciate in value.
Congratulations Tom!
You beat me to it!
How about a picture of the new babe?
Hi Clive and Jack Jagernouth,
On Newport: Tanks for the attempts to help me!
I have tried all the suggestions you gave me but nothing works. . .I am a "computer dummy", I am sure of it.
It is not important though. I just leave it at that . . .this sort of tinkering goes over my head No need to give me more suggestions!
I was just curious how the use of Newport compared to Vortex. . .of course I am sufficiently content with Vortex . . .all the bugs are out of it now. . .I have been "tinkering" with the Windows version of it for about 15 years now.
This problem with the Windows 7 not running 32-bit programs also affects some Vortex users. . .my programmer Chris Kruidenier is looking at a permanent "fix" for it. That too goes over my Head!
Cio!