is retired now but still kicking like a horse!
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The Vortex Forex excel spread sheets are not functioning as well as I have originally intended. Initially these spreads were rather simple and reflected the Vortex AIM methodology. Then the idea developed to make the Forex spreads function more or less as the on-line Forex programs. This appears to be rather difficult. In Forex Trading one deals with lots that are to be tracked. One can sell any lot that is active.
The AIM methodology is to dump equity into a pool and one sells share out of this pool or adds to them. . .the lost that are bought lose their identity.
I have not been able to mimic the Forex Trading features very well and my attempt to tag the lots that were bought resulted in a extremely complex procedure. It was not a fruitful attempt.
I have decided for the moment that an effective Vortex AIM Forex Excel Spread is not realizable and until further notice I do not sell the Vortex Forex Spreads.
I know you are too fuzzy!
I am a nit picker!
I recently saw a girl I liked with several holes in her jeans and I said: "Your jeans have a hole bunch of flaws!" and she said: "Are you crazy? They are attributes! . . . I had to pay $ 20 extra for them! You could at least SAY they are nice!"
I said "Are you crazy? I could have made these attributes in your pants for a $5 martini, and they would have been nicer than they are now! Your jeans are bloody ruined, they would have had a greater functionality without these holes!"
"Hold it Buster, I don't want your stupid advice about my pants. . .but. . . I like an honest man. . .they are rare these days. . .how about that martini? My treat".
"I like you attributes, but I still don't like your pants, but what the hell, nobody is perfect. You can get rid of these pants as soon as you get sick and tired of them. . . .Let's get the martini!"
My glass is full!
Hi Adam, I think it should be clear by now that, after everything I have written about it, is that my "beef" about the Residual Buy Signal is not a matter of aesthetics but a matter of the function of the Advice Generator: An Advice(Trade Signal) should be followed up. . . especially in a system that is called Automatic Investment Management. My argument has nothing to do with the effect on yield: If you are going to ignore the Residual Buy Signal anyway then setting the Advice=0 after a trade is executed will have zero effect on yield. When you are going to execute the Residual Buys then it definitely will have an effect on yield. . .especially if the stock price had dropped a lot. If the stock price keeps dropping then you should be advised to use external information to decide to keep buying or not, or to bail out. . .thus overriding the AIM Signals! . . .I repeat that the normal AIM operating mode appears to be to ignore the Residual Buy Signals. Then it is logical to set the Advice Generator to give Buy Advice=0 after each trade. If then you decide to buy more shares at the low price because of sensible external information(inside information for example) then it is perfectly sensible to buy more shares, but THEN you might as well ignore the Residual Buy also and put ALL the money you have(and more) on that stock. . .such overruling AIM has nothing to do with the AIM algorithm that is supposed to give an optimum Buy Advice.
In regards to the "problem" of deep divers this is nothing unique to AIM if you have an effective overruling management technique. If you do not feel comfortable with it. . .bail out right away. . only keep stock that is worth keeping. . .plus: only buy stock that is worth buying. This is the type of advice that should not even be necessary for any one that is investing. . .!!!
Would you buy a car that is not worth owning?
Now an issue in regards to Residual Buys and Deep Divers: If one is already "scared" to execute Residual Buys in normal volatility trading then it is simply a very logical thing to set the Trade Signal=0 after every trade. If prices drop faster than you expected then the feature of having the Buy Advice=0 would be even more logical. . .it would act as a filter to STOP executing the AIM buying frenzy that is implicit in the Residual Buy Signal!
So, again, my opinion on the AIM Advice Generator is that after each trade it should give a zero-Trade Advice. How much stock you want to buy at a given price change had nothing to do with it and you can decide that question by setting the AIM parameters as you like them to be. . you can set SAFE= 0 or even SAFE=-0,2 if you want to. you can set the Holding Zone high or low and the Min. Trade as you see fit. All these things are done, or at least have been discussed as real options for AIM in order to get the Trade Signal that are wanted. . .
Why then not set the Trade Signal=0 after each Trade IF you want to ignore the Residual Buys anyway?
Hi Tom
It appears that you are not quite so often taking part in the discussions nowadays. It's therefore an honor to get such a long reply form you. . an honor that I may possibly not deserve.
Your in depth understanding of how AIM functions allows you to present an elaborate analysis on the subject of how buying more, or less, stock and what it means to an investor and how these actions might manifest themselves. . .for better or worse. . .in terms of investment yield.
Hi Is1755:
I feel the same is true for the skillful reactions that you present on the performance of AIM in regards to various options that one can apply to variations in SAFES, investment size calculations(Ladder Concept for example), etc. and many more things that are rather difficult for me to fathom.
In regards to my view on Residual Buys I hope I have made it clear that it is not focused on how AIM it to function in regards to if one should or should not execute Residual Buy Signals. I certainly tend to accept Is1755's conclusion that in the long run various effects might average out in most cases.
My point is purely a technical issue, that you Tom, would probably appreciate: AIM, with the use of the Trade Advice Generator and PC definition is very much like a control system for the operation of a process that gives a signal as output to make a correction in the process management when needed. As the value of the investment changes corrective action is taken to reduce or to increase the number of shares so that in principle the value of the investment does not change a lot.
As an engineer one would design the control system to give the correct signal that is required for the intended process control. The idea is that the output is used as it is "received". It would be completely ridiculous to say then: "Oh well, ignore some of the outputs. .its not important, or if you like use them as you please then it's fine too, no one cares what happens anyway".
I do not disagree that this is a possible option. . .clearly it is already so for many years in regards to the Residual Buy Signals that AIM produces for buying and selling. No one has died because of it(I presume) and in the long term, as Cliff pointed out so well, it makes little difference, if any, for the portfolio yield. In any case you have no way of knowing what the effect of ignoring the Residual Buy Signal is going to have be because the result is dependent on what a stock price actually does.
Consider however that someone(say a junior operator=JO) picks up an operating manual for a control system in a process plant and the there are no clear instructions as to how to handle the feedback signals at the summation device where it is to be added to the SetPoint signal. The controller gives various signals to buy but it is not stated exactly if they are to be used or not. The JO asks his supervisor and the Chief says: "Just ignore the residual signals or use them as you like or use then tomorrow if you think it is better that way. . .its not important".
I say simply that is not a logical way to deal with automatic control systems. The output signals should be used as they are designed to be used. To ignore them is illogical and no one will be able to make sense of it on their own. This creates again and again the need to explain how best to deal with the multiple outputs whereas the way the output is to be used should be crystal clear right from the beginning.
As is clear in regards to Residual Buy Signals there are many ways to deal with it but if that is not made clear so that a newcomer to AIM can not find this out on his own then it is so much better to alter the system so that What is to be done is not subject to questioning. My advice is clear: Create a way to make it unmistakably part of the system that the Buy Signal is correct right away so that there are not a residual Buy Signals. The fact that experienced AIMers know how to handle this ambiguity in AIM is no reason to let newcomers time and again "break their legs" on the Residual Buy Signals that pop up when thy start using AIM.
LC, good to get your feedback on you actual executions of the Residual Buys. You proved my point. It's food for serious thought!
Just like you I did lots of manual calculations om AIM-driven investments and just like you I ran into 3 Residual Buy Signals. . .sometimes even 4! THAT experience set me to thinking: "If AIM is intended to be an Automatic Investment Management system then a means must be found to make that first buy after a price drop to include the "sum" of all the residual buys and that was the basis of my idea to modify AIM so that after a buy was executed and the price had not dropped the Residual Buy Signal was automatically zero! That made sense and if one would think the Buy Advice after a price drop was too large then there would be nothing wrong with executing a smaller buy or even to delay the buying altogether like Don Carlson proposed with his MACRO Filter. . .AIMers have argued ever since Lichello introduced his book in 1977 or so, to "add tricks and features" to AIM to make it function either more effectively or to make it more logical.
That is why I am so very surprised that this Residual Buy Signal is "overloaded with love" and that there is so much resistance to eliminate it or to deal with it formally so that newcomers to AIM can understand and deal with it right away. All these discussion that flare up on the Residual Buy can be eliminated.
In regards to the specifics to eliminate this Residual Buy System I solved that formally by setting the PC algorithm(for buying as follows:
PC2=PC1+f*Buy. . . . . . . . . . . .[1]
simply by replacing the standard 0,5 by a variable f
Then I calculated the sum of the residual buys with a mathematical formula and calculated the Buy Amount after the price had dropped as:
Buy = 1/(1-f)*(PC1-V). . . . . . . .[2]
an this is the exactly the amount if the regular AIM Value Difference
(PC-V) + sum of "unmodified Residual Buys" [3]
From this point forward one can modify equation [1] any way you like by changing the value of "f" and setting it equal to 0,5 gives you more or less the Lichello Case. The interesting thing is that after executing [1] the Buy Advice is automatically zero just as I had intended it to be.
At this point I developed Vortex AIM a little different than the basis of standard AIM by also doing this for the selling function.
What we have now with equation [1] is that the buy amount can easily be reduced IF one thinks that the Buy Signal gives too large a Buy then simply reduce the value of one "f" and the Buy would be smaller. . . up to the possibility that the Buy becomes zero! JUST THE SAME as you now do with regular AIM-tempering the buy with increasing the SAFE value:
Buy(tempered) =(PC-V)-s*V=PC-V*(1+s)
Just like now-a-days it is popular for AIMers to vary the SAFE Value to get the action they want you achieve the same by tempering the buy via the value "f" in [2]
Notice that in case f=1 you get the case Lichello tried at first and that resulted in aggressive buying so that ALL your money would have to be invested!
So, by using the variable "f" that is all one needs to do to calculate correct Buy and to calculate the next PC accordingly:
PC2=PC1 + f*Buy just as it was used to define this alternative method.
So my argument is simply this:
Use the factor "f" to advantage as a formal means to calculate the buy aggressivity as you feel comfortable with it. You do not need the SAVE and only you can suffice with the Holding Zone minimum price change and the Minimum Buy limit.
What happens then is this:
Price Change too low? Yes-----> No trade.
If Yes-----> Is Buy > Min Buy? No-----> No trade
If Yes-----> Execute Buy as advised.
Advice to trade = 0. . . .automatically
Calculate PC2 and wait till a price change occurs.
This is functionally no different than Standard AIM except that the Residual Buy signal is eliminated.
As always one can decide to ignore the advice for any logical reason that the investor may have:
a) No money to invest: Trade = 0. Buy Advice remains and increases as price drops;
b) No faith in the stock: Wait for more value decrease(filter) or bail out fast(Management Decision based on know-how);
c) Buy a smaller amount if you have not enough to buy the advised amount. This is simply a decision as a alternative to (a) but it constitutes ignoring the Advice and will result in a Reminder Advice. . .It means simply that you have not invested what you should have invested! You can invest this amount later if you have the money or you could decide to borrow this amount. Or you could decide to let the "shortage" run and hope for the best.
d) Instead of buying the advised amount you can buy more. This will result in a Reminder to buy the extra shares later, or if you have purposely bought only a part of the Advice you can safely let the "shortage" run.
e) You van decide to add Money to the Portfolio. Just like in Regular AIM you simply modify the PC by the amount of the extra shares you buy and you can also add cash without buying extra shares. This all simply amounts to purposeful Portfolio Management and does not alter the functioning of the Advice algorithm or the PC-algorithm.
For the selling you could even do the same(as I did with Vortex AIM)
Sell amount = 1/(1-k)(PC-V)
If you want the Sell to be less than the value (V-PC) then you can choose a negative value for "k" and this works the same as using Sell= (PC-V*(1+s):
1/(1-k)*(PC-V)=(PC-V*(1+s). . . V>PC
en
k=sV/(PC+(s-1))
and for s=0.1 this becomes, with for example PC1 = 1000 and V1=1200::
k= -1.5
Sell(s=0.1)=1200-1000 -0.1*200= 200 - 20 = 80
Sell(k=-1.5)= 1/1+1,5)*(1200-1000)=0,4*(200)= 80
PC2=1000-1,5*80 = 1000-120 = 880
One could select the k-value larger or smaller and select a holding zone as required. You then execute the sell or not, depending on the Holding Zone and Min. Sell just like you do now, but. . . .
If however you modify the PC as suggested, the PC would get a smaller and would create a mirror-image of the Buy Function and PC-modification. This is what AIMers do not want. They do not change the PC for a sell! This amounts to k=0 in my suggested modification and results in s=0 for the Sell. This identifies that the Sell Advice for Standard AIM and the PC Update are not functionally related and implies then that the AIM relation:
Sell=(V-PC)-sV
PC2=PC1
is an arbitrary setup, which automatically results in a Residual Sell Signal.
This arbitrary PC2=PC1 constitutes de-coupling between s and the PC up-date value and that causes a Residual Sell Signal.
At this time this would mean that in order to make the Sell Advise structure for AIM so that after a PC update would give a zero Sell Advice the PC update might be:
Sell=(SV-P). . (implies s=0 in my previous suggestion)
PC2=PC1
so that the PV would be equal to the new value!
Example
s=0,1
PC1=V1=1000
V2=1100
Sell = 1100-1000 =100
V3=1100-100 = 1000
PC2= 1000
Sell Signal(after trade)= 1000-1000=0. . .(works for any value of s)
If now one wants to temper the selling off of shares to conserve valuable shares one could decide to sell off less than the advice.
Say instead of selling off 100 you sell off 80 just as with Old AIM.
Then you get this:
Sell Advice = 100. . .(normally you would sell 100)
If however you think that in this case it is a Better option to sell only 80 or 60 or perhaps 200 then you execute the amount you think is a better choice. Suppose you sell 60 instead of 100 (because you feel strongly that the price will rise more soon):
Sell = 60
V2=1100-60=1040
PC2=1000
Sell signal after selling 60 = 1040=1000 = 40!
This is just like as for buying the modified way: You have OTHER that advised sold less, and the Reminder Sell Signal shows that: you not sold the advised amount! But now it is not a case of ignoring a good Sell Advice but having decided that selling less is a better option because you have used your knowledge of the market.
No doubt there are other ways to achieve "temerring" the sell-rate. vidence is that already all sorts of deviations from the Lichello AIM are used, including Vealies, LD-AIM, and Vortex AIM and others.
This simply means that none of the Standard Lichello AIM "features" are Holy and that AIMers are actually "sinners", when it comes to not following the original Lichello Religion.
Why then is there so much resistance to eliminating the Residual Trade Signals of AIM so that structurally the Trade Advice=0 after executing a trade that is ADVISED?. Why not sin a little more and make AIM better or at least logical? If one is not prepared to follow the advice without good reason then the Advice Generator should logically be changed to create an advice that is wanted. Lichello would have approved of that.
I am sure of that!
Newcomers to AIM would no longer have to struggle with an Advice Signal that is NOT to be executed.
Of course, I do NOT go trough all this work to convert AIMers that love their AIM as it is. I do it to hone my skills in spotting red herrings in arguments. Next I do it to increase my understanding of AIM itself and also to realize that Vortex AIM is not simply functional to give a Zero Advice after a trade but that its fundamental trading function is quite different than standard AIM. The greatest difference is its flexibility that VORTEX AIM can easily mimic Standard AIM almost to the dots on the i's, or be like a Buy & Hold System, or be an Aggressive Day Trading System.
From all this I learn a bit, each time I think of making something better!
Hi LC:
. . . So he changed the rule to only adding half to portfolio control. With that rule the additional investments quickly stopped. He felt it was a acceptably compromise.
Ok, but the fact is still there that one gets residual buy signals which is an illogical advice. One should at least expect to have an algorithm that sets the Advice to zero after a buy. If you set up a portfolio with a large starting value you will get 2 or 3 residual buys is the min. trade os not very large. If one would set the min. buy equal to the first min trade then the buy advice would also go to zero.
My point is (again) not that one can think about all sorts of "tricks" to limit buys or to ignore the residual buy signal. . .one can also decide not to buy ANY shares even if AIM gives a buy signal(called a filter). . .the point is that any advice Generator of an automated Management system should give the sort of advice that is logical and in line with the investor's expectations. If you decide not to act on a buy signal. . . every time. . . you are interfering every time with the system to overrule the Advice Generator. From any point of view that interfering is NOT part of the AIM Algorithm. If that is what you want to do all the time then you might as well call the system MIM. . .Manual Inverstment Management. . . or PIM: Personal Investment Management.
For all those years that AIM has existed newcomers have asked about that illogical Residual Buy time and again because they do not understand it. At least the idea that the residual buy should not be acted upon should be part of the AIM algorithm so hat automatically the Buy Signal=0 after a trade if the price has not changed. As soon as you do this. . and it does not alter the way AIM works. . the Advice Generator gives logical buy signals.
The greatest benefit would be for newcomers to AIM. . .you do not have to time and again, to start up a unnecessary time consuming discussion about doing something illogical because it is supposedly the best thing to do.
Hallo Adam, I have no disagreement with your point of view in this that you are comfortable with ignoring a system output of a machine that is supposed to advise you. Of course you can compensate for a wrong advice if you know the output error. If a machine I designed does not give the output that I want it to give then I say that it has a defect and I would redesign it so that it does what I specified it to do. You want to call the Residual Buy Signal a feature while others want to call it a flaw, and that was also the consensus many years ago when the topic was discussed in depth.
It's similar to having a crack in a wooden table. . .the crack could be a feature of the tree before it was cut or it could have developed later. The fact is that some people would not expect their table to have a crack if they want a table without one. Even if it is feature they still will call it a flaw and if they get a table with a crack they will reject it. A point I have made years ago is that in Lichello's book, which I have read quite intensively in order to grasp the fundamentals of AIM, Lichello did not point out this feature in any clarity. If he had intentionally designed this feature then no doubt he would have elaborately pointed this out and would have put this on the foreground with examples, as he did for the main issues of AIM. . .even to a fault, he stretched out the chapters of his book that describes the path that led him eventually to AIM, to give the book some volume.
I have argued that without a "flaw" and to get a Zero Trade signal after any trade such a trading system is quite a logical instrument. . .After one buys 2 kg of apples it makes no sense to automatically buy another 1 kg and then 1/2 kg at the same price. . .even if there are no extra costs involved.
Also one can limit his buys to any desired level of risk limitation by adjusting the trade sizes and then buy extra shares later. . even at the same price if one wants to do so while again getting a zero advice after such an extra trade. So the essence of my argument is not that one can ignore the residual buy advise but that a Residual Buy is an illogical part of a system that is supposedly intended to take the emotion. . .(read also "judgment". . . out of investing by way of Automatic Investment Management system. . . which Lichello and others after him loved to call an Engine. . and the usual advice from AIMers to new AIMers is: "Just Follow the AIM System, don't monkey around with it". Why then ignore Trade Advice output?
Well, ignoring an output of an Automatic Management System does not appear to be a very logical procedure. It follows that, if you feel comfortable by ignoring the output of a “Advice Machine” that is designed to give proper Trade Advice you might as well ignore any Trade Advice that your system gives and just invest on the basis of other skills and gut feeling. Moreover if AIMers generally agree that the Residual Buy should be ignored then one might as well modify the AIM algorithm to set the Trade Advice to 0 after each trade. To make derivatives of AIM, or make improvements to AIM is certainly not something that I alone have done. More than that, a great deal of time and effort is demonstrably spend by AIMers to search continually for improvements/adaptations. In this light it remains a mystery to me why there this persistent aversion Among AIM users remove that "Feature" of AIM that is demonstrably a Flaw from the point of view that an automatic trading system should be one that gives optimum trade advice.
In this light I say that if you ignore the Residual Buy then it MEANS that The Advice after a trade for that moment should be 0. If after 1 day or after 6 months the price is again the same (it could have been very different in between------> missed buy opportunities or missed sell opportunities) then The Advice should be zero again. If then you decide that, on account of all sorts of external factors, you are convinced it is wise to buy more shares or to sell some, then there is no reason you can not buy or sell extra shares. This is the "Overlay Management" you as an investor should be doing all the time anyway. Even with standard AIM it is very simple to build in a "Feature" that sets the Buy Advice to zero after a trade. If then the price remains the same you can as always decide to buy more shares later. . .but then you do that for good reasons from the market signals or fbecause of an analysis you have done. Structurally ignoring a system output when this output should be zero is what I call a FLAW, any which way I look at it. . .any machine that does not do what it is designed to do is flawed and should be repaired or redesigned.
That people can use and cope with machines that are flawed is nothing new, but usually they prefer one that works as intended.
@ Howard Investor,
. . . .after I make the above move I get another buy stock signal even if the stock price is the same. .
You have hit on an issue that every now and then pops up again as people get to know the AIM system. It is a very valid observation. More than that! If you execute your very first buy, after setting up your AIM Portfolio, and wait a month or two months or 6 months for checking the Trade Advice, and the price is again the same as before, then you will get the same Residual Buy Signal as you get right after having made you first buy. This is because that he AIM Buy Signal is driven by stock price difference.
This effect is quite peculiar. For any trading system one would expect that a Trade Advice should be optimum and that just after you have bought stock the Trade Advice should be 0 and only when the stock price changes should a Trade Advice appear. One can conclude that if you get Residual Buy Signal then the original Buy Signal was not an Optimum Buy Signal.
Apart from anything else, a Residual Buy Signal, if carried out, will increase the trading costs for the amount of shares bought at the original price. . logic demand the conclusion that the sum of all the Residual Buys you get within the Minimum Buy Amount should be bought in one lump and thereafter the Buy Advice should be 0. This way you would not waste money on trading costs for multiple buys at the same price.
Many years ago I started trading the AIM-Way and immediately discovered this flaw and I gave it the name The Lichello Flaw and I modified the AIM Trade Advice Generator after a rather interesting mathematical analysis, by which The Trade Advice could also be adjusted so that the first trade would be the right trade that was optimum for the type of investing style one preferred. . conservative, giving a small buy signal. . .or aggressive, giving a large buy signal. Likewise this also was made to function that way for the selling side but with a different adjustment factor if needed.
In those years very deep going discussions on The Flaw where held on this forum. Some people agreed with me but others stated that it was not so much as “flaw” but rather a “feature” that could be dealt with by [I]ignoring[/I] it and only executing a trade IF the stock price changed by a certain amount.
Steve is also more or less correct that the Flaw can be dealt with by executing the residual buys. . .the “feature” mentioned above would stop the buying before great harm would be done because the Residual Buys get smaller and smaller if executed, and then the Minimum Buy Amount would kick in to stop the potential harmful buying.
I do not agree with this: one would have accrued extra trading costs unnecessarily AND if one did not execute the residual buys one would have bought too few shares, or at least might feel they did.
My adoption of AIM (Vortex AIM) functions slightly different than regular AIM in that it is symmetric with respect to buying and selling(A Ratio Trading System). . .regular AIM is not(An Offset Trading System). These differences are interesting and AIM-ers can live with the Residual Buy “feature” . The Vortex AIM system has it advantages too. . mostly a great flexibility to make the trading aggressive for low volatility funds and trading conservatively for risky funds. Vortex AIM can even be set to a Buy & Hold strategy simply by setting the trading parameters at specific values!
If one seeks an AIM-derivative trading system that sets the Trade Advice to 0 after each trade one might like the features of Vortex AIM a lot!
If you want to dig into the Lichello Flaw discussion from years ago then simply search this forum on “Lichello Flaw”.
Hi Clive,
In many respects the PP is a form of AIM. A large decline (or rise) in one results in the multiple others injecting (or receiving) the proceeds (buy-low/sell-high), very much in an AIM like manner.
Is that then not the exact equivalent of the Dollar Cost Averaging (for mutual fund that have periodic inlays)that preceded Lichello's technique?
One would simply have to sit back and not "waste" so much time on playing the market. With the Vortex AIM one can use VERY conservative parameter settings so that as the fund value drops a few extra shares are bought and as the the value rises a few shares are sold. . .this way one does not have to watch the market continuously.
Personally I always preferred aggressive trading and as expected I spend a lot of time watching the market. When I was investing I made a lot of money with that till the year 2000 when I stopped investing in the stock market.
Currently my resources are far to small to do any meaningful trading and I just played the Penny Funds for a but but that did not pan out very well. The Calamity Fund became a calamity . . . only lost about € 500 but as percentage it was more than I bargained for.
Now I am watching the World from the sidelines. I get to feel the excitement in the market without losing any money!
Regards,
I suppose Lost Cowboy hit the nail on the head on that one!
In this regards your two Ma's in TA would make a lot of sense! With a horizontal trading range one could get stuck with the TA-methodology to sell at a 10% price drop and then one will sell everything. Then at a 10% rice buy in again and the the price drops again 10%. . .you can see that such a strategy is a disaster. A short MA for the buying would prevent that.
That must be it.
One learns a bit every day.
In the years 2050 or so I will be the smartest man on earth.
Mmmmm. I think maybe you got something there!
You mean that after a price reversal one could experience a short lived peaking for a few day with then a resettling of a slow rise. One might sell off too early.
That actually makes a lot of sense.
But one could "see" such a jitterbugging of the price and ignore it without specifically installing the short MA filter. How would one select a short macro? 3 days? 5 days? 20 days?
I am stuck here on that one.
Principally I favor short time trading volatile stock. . .I am out of trading now. . .so I have not much use for such filters in the first place.
Thanks for the tip LC.
MACRO-AIM Action Points.
When Don Carlson first published his MA cross-over Filter there was just one moving average to consider rather than two. I do not remember hat Don changed this to two MA's. The idea behind it is of course quite logical and is a formalized means of a Trade Delay procedure. A
What is the principal rationality of using two MA's?
Suppose I am a "trigger happy" investor. I would tend to a short MA, say 10 days or so. What would be the added value to also use a long MA of say 90 days?
I would argue that of one is trading frequently and run with the short term volatility the long MA would be meaningless. . the other way also. . .someone that likes to use a 300 day MA is more like B&H investor and would not care about a short MA
So, for an investor that fits in between these extremes would a single MA of say 150 days not be most effective?
For example if the price drops and the 5 day MA crosses the price line it is time to sell and then the Long MA is still far lower. .it means nothing to me.
On the down side if there is a recovery the 5 day MA crosses the price line rather quickly: time to buy and the long MA means nothing either.
That's Fuzzy Logic
When the prices are down then flip a penny and buy the stock!
Thanks Firebird,
I was not so much looking for an answer for tax purposes as a formal opinion on the question which way of actual investing
"packages" of equity and then selling them in a certain order and then to determine which ways was thy most profitable over various +/- cycles for the equity price.
Various people have stated that it makes no difference. One can of course go through an simulation using two different techniques and find out empirically. I presume you can do that also with the Gainskeeper software.
I will look into the website of Gainskeeper and see if there is a free download.
I am not doing much investing nowadays. . been doing some disaster fund investing as an experiment. . in the end is was a disaster. . . as a percentage anyways. I have one fund left at € 0,01 per share(10000 units). . .at the moment it is a flatliner
Regards,
Consumption taxes already exits and people complain to high heaven about it as well.
If you abolish income tax then the collective consumption tax will have to raise to meet the money demand of the government. . not even raising the issue that the government is simply a bunch of people like you and I and the next people and the thieves and murderers next to them.
If we have to pay double or triple the consumption tax then you also lose the principle of a progressive taxation on the rich. . .the poor will pay the bill again. . .as it is now. . . everywhere.
If you still want to maintain system in which the poor are helped to survive at a meaningful level of existence then you will need massive financing of the less fortunate and that will have to come from the consumption tax, which will have to be higher again.
For as far as social support programs exist in the US they are extremely meager ones. . .or else one would not have such an appalling divide between the poor and the midstream population.
A high consumption tax will not change anything without the recognition that a reasonable minimum income for the less fortunate should be instituted.
It is unavoidable that raising the level of the living standard for poor people will require the willingness of the rest of society to carry the weaker ones. . the "strong shoulders carrying the heaviest loads" argument. . . . If that is not a collective as option for a nation a nation to have then you will retain a system in which the poor are sucked dry. . like already is the case in most countries. . .not in the least in the Western world were, among others, Calvinistic and suffocation religious mentalities rules the roost:
He that does not work shall not eat.
People are mostly very selfish and in this process the poor are trampled on. I have a vision of how people could have a better life but it requires elimination of greed from the human mind. . .a tall task.
In the end even that would not do the trick. . .in a world in which everybody is a saint all the saints will starve as no one will carry the whip to make the workers sit up and do some work for profit.
My Utopia crumbles as I want to raise it.
No exit.
It's time no for coffee and cookies.
After analyzing the implications of First In- First Out(FIFO) and other selling strategies on
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=43345357
I have concluded that for the Vortex AIMing procedures for FOREX trading these sell strategies are irrelevant as they are simply fiscal instruments for retarding the paying of current taxes.
For the Vortex Excel programs the Sell Strategy for rising equity unit prices will remains exactly the same as for traditional AIMing of common stocks. The Advice Generator will calculate the Sell Value on the Portfolio Value Change.
The only thing that need to be done for the execution of a Sell is to match the Sell to a particular Lot on the Forex account.
Example
Lot sizes on the Forex Account in number of units acquired at progressively lower unit prices:
100000
500000
1000000
With dropping prices the AIM-Investor would typically invest stepwise equal amounts so that the number of units increase with each buy. With an aggressive Vortex Method one can also increase the value of the investment as the price drops. The only thing that is achieved that way is that the Margin Available will be reduced more rapidly.
When the unit price starts rising at some Vortex will give a Sell Advice, of say a leveraged value of € 500000 at an average unit price of 0.93, then the Lot Size will be calculated
€ 500000/(€ 0.93/unit) = 537634,4086 units.
Thus the Sell is set at 500000 units and the second lot that is bought will be sold.
The Excel program automatically calculates the number of units that is associated for the Sell Advice. One need to simply adjust the value of the Sell so that the number of units to be sold matches exactly the nearest lot size.
Thanks Clive for steering me to that "Vealie Link". It answers my questions quite well I think.
If one acquires various Lots and keep them apart one could sell in a certain sequence. If however all the Lots are in the same portfolio this "tagging" is not possible.
As I understand it then the use of FIFO and FILO can still be applied from an accounting consideration. In my example if one would sell 100 shares after a price-dip reversal the actual Sell would simply be executed from the common pool of equity at the prevailing market price. Suppose the initial Lot was purchased at unit price of 10. Say the equity is sold at a unit price of 2 after the price has dipped to 1 and on that point 1000 units were bought.
100*2 = 200 value sold. . . (on the unit price of 1 there is a 100 profit)
With the FIFO accounting one would "register", for tax purposes only,
100*10 = 1000 purchase value
100* 2 = 200 Sell Value
Loss = 800
From the AIM Investment Management point of view, I gather, this "Fiscal Fudging" is completely irrelevant.
It is therefore simply a way of retarding paying tax on profit. . .if the unit prices keep rising the progressive sells will generate progressively greater profits from a fiscal consideration so that EXTRA taxes are to be paid on the un-proportionally higher profits(as compared to average unit price).
I suppose this would be a bad thing if in the future one's income is also much higher than it is now, as the tax rate would be un-proportionally higher as well.
On the other hand if one has already a high income now and expects later to have a lower income(for example because of being retired) it would be a good thing to retard the paying of tax now as the tax rate would be lower in the future.
I think I got it!.
Stocks don't go stale >>grin<<
They don't?
How about asking ENRON Shareholders if they don't. . .
>>grin^3<<
Anyway, you are confirming my gut-feeling on selling Forex Lots when multiple open lots are on the account.
This way my Aim-method of calculating the sale size on the average price would be the easiest.
b]Off topic
Why would it male a difference for tax purposes to sell the lots that have the highest purchase price first? In Holland this would not make any difference as taxation occurs on average Portfolio value and THAT is determined by the average unit price of the equity throughout the year. . . anyway, that is the way it used to be. In the last 9 years I have not been investing so it could well be that one is taxed now on the Year End Value.
I read someplace that taxation rate here on shares and such values is based on the assumption that, win or loose, 4% profit is calculated on the equity value and that 4% is added as investment income which is being taxed just like other income above the exemption limit.
So if one has a € 1000 investment the assumed earnings are € 40 and that is taxed at say 33 %. . . one would pay € 13,33 tax or an effective rate on the € 1000 of 1,33%.
How does that stack up against the taxation on $ 1000 equity in the US?
*******
PS: I just saw the post of Is 7750 with the Tax Reference on FILO etc. I am going to read it now!
Hi Fuzzy,
I know that the FIFO & FILO are general concepts and have all sorts of applications. . . the most obvious would be the storage of food stuffs in a warehouse to make sure the food lots are not getting stale. . in that case the FILO would not be a smart thing to do.
The with Forex trading thing: would it make ANY difference at all for the Profit Function?
If one has 4 lots on his account, bought at
Dollar price
10
5
2
1
and the price starts rising above the 1 to say 2, one can choose to sell A) the $ 1 Lot or B)the $ 10 Lot.
In Case A there is a 100% realized profit for the 1-Lot
In case B there is a 100% unrealised profit for the 1-Lot
In both cases there is an unrealiased loss on the 10 and 5 Lots.
If the price never return to 10 that 10-Lot suffers a loss in any case. If the price does return to 10 the profit on the 1-Lot is 10-fold and the profit is 9. . .On the 10-Lot there is n gain, so I can't figure out if one or the other method gives an advantage or not in the long run.
My "feel" is that it strongly depends on the risk profile for the equity. If the price fluctuations would follow a 50/50 risk profile I would venture to say that there is no difference in portfolio profit (or loss) for the various options for the selling sequences.
I can not put my finger on this gut-feeling that it makes no difference but to prove it is another thing
Question about FIFO & FILO. . .something to chew on!
In AIM-trading any equity units bought are lumped into an "equity" pool. . .all equity units are identical and only the average price is relevant. Selling equity is like taking water out of a swimming pool with an arbitrary size bucket.
I have attempted to model my Excel Vortex Forex program (AIMing currency pairs with leverage) to the way Forex Trading is executed with tagged lots. . .one can choose to use FIFO or FILO or Arbitrary Lot Selling(ALS). I find it impossible to program this complexity in Excel. . I got as far as making up calculation strings to tag the lots that were bought but when selling I can not pick a particular lot ot of the "pool" with lots.
The Question
Is there any advantage to FIFO and/or FILO equity selling as compared to simply grabbing equity oüt of the "Cash Register?"
The analogy I "feel" would apply here is that if you withdraw money form a bank account the order in which the money was put in is not relevant and neither is there any advantage to taking it out in a particular sequence. . .as would be possible if the money in the form of bank notes(which are tagged) is taken out in a FIFO or a FILO sequence.
Has Anyone. . . or Any One. . . a formal opinion on the effects FOREX AIM Trading using the FIFO or FILO method?
The particular problem I ran into with the excel programming is explained in more detail on
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=43339519
I would be interested to hear some views on the FIFO-FILO-ALS trading options.
Progress Stagnation on Excel Vortex FOREX Program Development
The last few months I have ventured to make the Vortex FOREX program on Excel match the procedures for the online FOREX trading and I have run into a programming snag on which I seek some qualitative feedback. I have scratched my head on this problem so often there is no hair left on it!
Initially I had used the standard Vortex AIM technique for trading the Forex lots. The principle here is that equity for sequential buys is lumped into a single pool so that the individual trades lose their identity. . .all the cows in the herd "disappear" as if they are raindrops that fell into a swimming pool! When a sale is triggered we trow a bucket into the pool and take out a certain amount that is advised by the Advice Generator algorithm.
With Forex trading every buy is tagged and remains identifiable. . .the purchase price remains known for that lot and the profit per lot can be calculated any time. Also each lot remains in view on the trading screen and the trader can sell each lot whenever he wants it. He can use:
* First In First Out: FIFO = LILO
* Firsts IN Last Out: FILO = LIFO
* Arbitrary Lot Selling: ALS
As I see it the ALS is like AIMing: one does not attach any importance to the order in which equity units are sold as the price rises. . .this would be a simple strategy IF it could be demonstrated that neither FIFIO nor FILO would provide any advantage. Some how my gut-feeling tells me that it makes no difference and that if multiple lots are bought at dropping price the overall effect is obviously that the average equity unit value is identical to the sum of values of individual lots divided by the total number of units. A person I know also states that FIFO- or FILO-selling makes no differenc as compared to ALS. The question is this:
"Does FIFO or FILO for Forex Lot TSelling give any advantage over ALS?"
If the answer is NO then my problem is solved and I do not have to add tags to the buys. For the buying it is possible to tag the trades to calculate the total lot value but I find it extremely cumbersome to do and I know no way of automating the value function when buys are sold. . . .it requires a lot if manual interference and the Excel strings become extremely long. This method is not suitable for practical use. Moreover it is also impossible to do simulations if manual interference is required.
The big problem arises when the equity start rising in value. The Sell Advice never matches the Lot Sizes and then even if I manually adjust the Sell quantity I can not sell a particular lot, so the Sell becomes a "scoop" out of the equity pool, and this throws a monkey-wrench into my attempt to use FIFO or FILO as I would want to be able to choose.
My conclusion is that the only practical way is to revert to the ALS Method and at the best when a Sell Advice comes along one can adjust the sell to a lot quantity that is "on the board". This way one would sell out the lots in an AIM-WAY.
From this qualitative analysis it is clear to me that with an Excel Vortex Forex program it will not be possible to sell lots in a particular sequence but that one will be selling equity units from the "pool".
For the rest of the Vortex FOREX features such as Margin Used, Margin Available, Profit, use of pips etc., these incorporated in the program.
Thanks Clive, for the extra remarks on what you do and personal preferences based on experience. The thing I get out of these discussions is a greater appreciation of various methodologies, and in the end ones picks the method that one is most comfortable with.
As I have not been investing anything since 2000 and only started again recently I have not a track record of how my exp. trade size system would have worked for me. In my investment period up to 2000 I used an aggressive "Turbovest" method and made a good profit. I even dis not calculate the trade sizes. . I just eyeballed the stock prices and invested according +/- Plus I used my know how of what certain companies were doing.
Regards,
Conrad
Clive,
I spend the entire night doing various things and have to do more yet. . .I am going to read your post carefully later today as at this moment my brain is on fire again . . .but I want to give you this link about my development of the Exponential Multiplier for Vortex. I searched the website and found it, along with a discussion with Con Carlson on it.
It appears that in fact I had exactly modeled a trade size calculator into the Vortex program(Excel)with an exponential function to concentrate the buys towards the bottom of the trading range as well as sells towards the top of the trading range, in principle this would combine the AIM technique for trading relatively small amounts close to the middle of the extremes and also a Delay Technique (a sort MACRO-effect) for not selling too quickly as prices rise an not buying too quickly as they drop.
The link is: http://investorshub.advfn.com/boards/board.aspx?board_id=1341
with the principal Posts # 163 and 168.
I was amazed to read what I had done in those days. . .the only difference with the specific d'Alembert refinement is that when the price trend switches upwards from under the middle point, the Sell size is close zero as the Exponential Sell-function approaches zero at negative infinity and only starts to give substantial sells close to the upper trading range. . this way, with the selection of shapes of the exponential curves one could create any buy and sell behavior that is desired. Its a shame I dropped further refinement of that method. On the downside my EXP-function mimics quite well the progressive Buy tactic suggested by d'Alembert. The exact progression to be used is then simply a matter of choice.
Perhaps I will take on the challenge again to develop it further so third parties can use it easily.
New Vortex Portfolio set up
After I closed my EUR/USD Turbo short 1.448 at € 3.75 on September 4 it peeked at € 4.00 for a moment and went down again. In the following few days the EUR/USD reached the 1,448 StopLoss. Also I sold two Mutual Funds at a tiny loss as these funds almost did hardly move: I seek more frequent price changes for the Vortex Trading.
I have started another experiment:
A Calamity Portfolio with penny stocks. The movements occur in great jumps, easily 25 to 100% is not unusual. I selected 5 stocks that were listed under € 0,05 and 1 listed at € 0,01. I bought 4 different stocks on 09-09-09 and one is standing in the waiting queue. 3*9=27 and 2+7 is again 9. . .The 9 is a most special number for me: I met a girl 09-09-1976. . .that is 33 years ago and 3*3=9 again but is does not end there! This girl was born on the 9th of June. We were going to get married but 4 years(no magic in that!) we split more & less. . . first less and then more. That was 1980. . .and yes, 1+9+8=18 and 1+8=9
That are seven 9's. . .and yes 7*9 = 63 an that adds up to 9. That are eight 9's . . . 8*9=72 and that is again a 9!
The number 9 produces magic. . . so I suspect that my 4 new investments will be loaded with magic: they might suddenly disappear into nothing or they might multiply in value without me doing anything anything at all!
The number 9 in the Kabalarian Number System is supposed to mean something. Of course, I do not for a moment believe in that nonsense. . .just the same, just for fun, I am going to look it op on Google what the has to offer . . . just hold on . . . I should be able to find it within 15 minutes so I can report to you an this post. . . here we go:
I got 5 minutes left:
Cute fact: My birthdate comes out to # 4. I happen to buy 4 different stocks on the 9th!
4 birthpath:
The 4s bring intelligence to universal love through clarification
and understanding. The 4s represent a strength of intelligence,
constancy, and steadfastness which has a stabilizing influence
on others. When the 4s develop an understanding of people, they
understand "the reason why" and then the higher qualities of
patience and helping others through education express through
the 4s. The 4's awareness of helping others is through their
intellectual illumination upon many subjects helpful to others.
See: http://ezinearticles.com/?numerology-and-the-number-9&id=889152
The number 9 relating to a balanced numerological personality or cyclical timing energy is most often associated with tolerance, generosity, forgiveness, passion, creative energy, success, romance, benevolence, and a deep love of life. Nine energy flows like water and is reflective of universal love.
Clive, forgive me for being a bit dense for now. . .I have read the text at the bottom twice and my brain is cooking because of information overload. I get the drift up to the ladder definition from 2 to 10.1 in terms of average portfolio yield percentages. . .at 2 I would be at 100% equity and on the top with the yield at 10% I would be 100% in cash.
Also I get the portfolio steps of PV/17 at there are 17 levels between the extreme points 1 to 18. I take a portfolio value at the value of 1700 so each step is 100. . as I start out. . .without thinking about the question as what I should do when I start a new portfolio. . I am already investing(let's assume that) at some point in between, at say 4.506% yield. . . exactly in the middle at equity value =1700 and I have 170 shares so that the share price X=10 and I have 1700 Reserve at that point.
Error correction
In the calculations below I have erroneously assumed that I had 100 shares so the share price = 17 instead of 10, as I used. The numbers in the calculation are wrong but that doesn't matter. . .the methodology of what I did is the key to my attempt to understand you. Forget the numbers and try to follow my interpretation of your method.
When the price rises to the 10th level at 4.715 % yield the value had risen 4,638260098 % and the equity value is now 1778,850422 and the step-value has risen to 104,6382601 so that I will Sell that amount:
PVn is PVnew
PVn = 1778,850422 - 104,6382601= 1674,212162
STEPn Size = 98,48306833
Nxdel = 104,6382601/(10*1674,212162/1778,850422) = 11,11781514
Xn = 100* - 11,11781514 = 88,88218486** shares
*should be 170
**should be 158,8821849
On the way to the top the equity grows but each time the equity is turned into cash.
On the way down I do the same but then I buy 2 step-units instead of 1. . . .then I think I should use the Reserve for calculating step sizes. . .a little Fuzzy on this. . .
This seems an interesting approach but I am not sure if that is your interpretation.
The way I see it is that the step levels on the ladder remain at the indicated yield points but the step size should not be calculated by dividing by 17 BUT by the remaining 8 steps. . . in 8 steps I have to get rid of all the shares!
PVn = 1778,850422 - 222,3563027= 1556,494119
STEPn Size = 194,5617649
Nxdel = 222,3563027/(10*1556,494119/1778,850422) = 25,41214888
Xn = 100 - 25,41214888 = 74,58785112 shares.
(ignore the calculation errors)
Aha, this looks better! As the 11th level is reached on the way up there are only 7 steps left are left, etc., etc. so that at the 17th level the remaining equity is sold---> 100% cash.
On the way down from the start point the same generic calculation process is used at each level but I now have to look at the Reserve of 1700 I started out with and have to divide that up into 8 steps all the way down to the bottom level.
If I use the d'Alembert principle of increasing the stake at each "betting round": 1,2,3,4,5,6,7,8 x the base unit X then I must divide the 1700 Reserve ahead of time into base stake units:
Step#StepSize
10:X: (X=Basic Stake for the loss . . . 8 steps & 1700-X left)
11:2X: 1700-2X left, etc.
12:3X
13:4X
14:5X
15:6X
16:7X
17:8X
18:9X. . .Cash = 0 ---> 45X = 1700 X = 37,78
Every time the price trend reverses after a step down to a higher level the equity value is again divided by 17 and the the process starts again, but possibly from another level on the ladder, and the calculations start from there in an identical way so that each time the 10% level is reached there is 100% cash. This a beautiful mechanism as each time the trend changes from a low point to a higher level the process follows and identical algorithm. As long as the extreme points 1 and 18 are fixed the trading cycles up & down each time on the way down using the 1,2,3,4. . . principle one will gain strongly on the dip-investing on the rebound almost in the same generic fashion as my Vortex Method with aggressive buying, but more structured to create a progressively greater Buy Multiplier to the Dip Bottom.
If my interpretation is not exactly in line with what you tried to teach me then at least this way would be an interesting alternative betting strategy using the remaining Reserve at any point in the cycling of the Y-Z probability distribution of the price cycling.
Supposing my interpretation is taken as a basic technique for a 50-50 price cycle distribution then the the 1,2,3,4, . . .stake investment could be modified to a particular type of investment for which the behavior deviates from the 50-50 behavior. . . for example 1,0,4,0,6,0,8,0. . .skipping a level each time to concentrate the buying more strongly to the bottom of the dip. Actually I have worked on developing this progressive type of investing in the past by using an exponential increment model . . it was triggered by a method used/proposed by Don Carlson: to use the middle of the trading range to calculate increasing trade sizes as the price reached the upper and lower boundaries. . .using something like Bollinger(??) Lines but I have not developed that exponential trade size idea to a final model for actual operation. . .the mathematical problems for doing this were somewhat complex and I abandoned the development. The idea was to use this exponential trade size also for selling. . . concentrating getting out mostly close to the top. My principle difficulty was to automate the floating character of the idea in Excel. Maybe you have "handed" me the solution to my problem with the d'Alembert version: As I see it the Ladder Construction is (or could be) a Floating system. . as the average price moves steadily upwards while the +/- cycling remains the midpoint of the ladder can be moved up as well. . . as the conditions may dictate.
Thanks Clive for providing the input for me to grasp the significance of the attempts I made years ago during my discussions with Don Carson. . . this makes me realize something:
"Because I was able to stand on the shoulders of Giants I was able to see a great distance". . .supposedly Isaac Newt had said that or something to that effect.
I feel a little bit like that now, even of the things I see are not the same as you wanted to show me.
Clive, Thanks for the explanations.
On the ladder I am a bit Fuzzy. . .no, no, not TooFuzzy, but just a LittleFuzxy.
First, if I take proportional steps from 100 with 5% and I take a ladder with 10 rungs I end op at a 100(1+0.05)^9=155 step size at the top. . .(Ahaa, this is just like compound interest gain, I get it!), and the ladder will look like this
Step\size\Value
0\ 100\ 100
1\ 105\ 205
2\ 110\ 315
3\ 116\ 431
4\ 122\ 553
5\ 128\ 680
6\ 134\ 814
7\ 141\ 955
8\ 148\ 1103
9\ 155\ 1258. . . .Gain is 1158
From this point onwards it got fuzzy. Suppose I am at rung# 0 of the ladder and have no dough left, what will be the action if the price hits 205? What then from am AIM perspective? Is the 205 level the Holding Zone 105/100----> 105% for the next Sell? At the top the HZ would be much smaller: at step# 8 the HZ is 155/1103-----> 14%
My question is: "How much do I sell at each step. . .if I would not want to le the profits run?
On the d'Alembert betting. This is more or less the example I used in my book on my AIM-variant method (to show gambling is a silly game compared to investing in value stocks), and I used it to illustrate that after all the trouble at the Roulette Wheel you end up with only a gain of 1 after one cycle(or at most as you showed) a gain of at most 3 after 3 loses and 3 wins, but less if the loses and gains occur more randomly. I see it this way, if I understood you correctly:
1L=-1
2W=+1 . . What now? What do you bet if you win 3 or 1 ?
1L=0 . . .I conclude 1 base unit, as after a win 1 on the 50/50 cycle you should run with the profit and start again from scratch!
1W=+1 . . Run like hell! Start again with 1
1W=+2. . .Run like hell en start with 1! . . .Right.
Now this way:
1L=-1
2L=-3
4L=-7
8L=-15
16W=+1 . . .
Shit! . . .Still only 1 up and risking loosing 31 when the wife get fed op at the Roulette Table and wants to go shopping instead, then one is down 31 and then the shopping loses start to pile up on top of that! It’s a losing battle!
It is better to bet on pig bellies stock or on FOREX. The chances that base values recover after a loss increasing as the price drops and then with lots of shares accumulated at low prices the profit is substantial! THAT’s a winning strategy. . .as long as you do not bet on an ENRON-type companies. Although I can appreciate . . .of course. . . . that with AIMing and the increased buying at dropping prices the extra stake-method works. . .that is in general the idea of the Vortex strategy with an aggressive Buy Factor, although that might be more like the Martingale strategy. I understand that after a win and starting afresh with a reduced Buy Factor one would "run with the profit" and get back to investing with 1 Base Buying Unit rather than a large stake. It looks indeed like an interesting way to limit loses as an alternative to bailing out at a stop loss too soon.
I think I got your point!
During those years I've attempted every possible extension, including complex charts, predictors and all sorts, but have found no evidence of potential improvements over simple fixed trade points.
On the main then you conclude that all that effort to try to figure out ways to beat the market on ONLY a statistical basis the returns are quite low in relation to the gains? Although if you start out with a Portfolio of a million 4%/year gain is still a gain of 480244 in 10 years. . .that is, if the wife doesn’t start picking away at the gains in the mean time
I do not have that problem!
Hallo Clive,
With d'Alembert's Rule I have plenty of experience: it says the the Sum of external and inertial forces sum op to zero
0 =Sun(Fe)-Fi. . .simple dynamics
but I bet you meant something else!!! I will look it up!.
On the rebalance thing I would tend to agree with you. This is why understanding the market and how it is most likely to move is so very importance to beat the herd that does not understand it. This is not mean to sat that I understand the market moves a lot! On rebalance I would tend to follow my "feel" for the market. . .let the profit run unless the volatility on the way up is strong so that selling/buying will accelerate portfolio growth.
Confusing I know, but what is in effect occurring is that d'Alemberts generates profits out of 50/50 outcomes whilst most other methods just break-even.
The exact details escapes me for now but from your conclusion I feel there is some similarity with the aggressive buying in dips that typically are the idea of my aggressive Vortex settings. . accepting that many stocks fluctuate more or less randomly the +/- moves are generally 50/50 events. By buying strongly in the dips one gets out of it with strong gains rather than approximately break even. The risk that the price stays down for good is less than 50%. . it must be. Is that the essential of d'Alembert's idea to gain on 50/50 events or does his idea strictly relate to rebalancing?
The level of analytical work you are doing astounds me. Even though I am a technical chap the depth of your work goes over my head. .it is something that I try to avoid. . when I see the complex charts about stock movements with 10 or more curves on it I, as quickly as possible (usually) turn to something else!
I appreciate your response though.
An interesting link on down-trend investing that will be music to any AIMer-ear:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41251448
Apparently my Turbovest Method was already invented in the 18th Century!
See the link at the bottom of my News Rapport.
I though I had invented something new
A little bit of News on the Vortex Front.
With the help of a Canadian Forex trader and information from the www.oanda.com website I have substantially overhauled my Forex excel software. I have now modified the spreads to be in line with the actual Forex Trading practice that goes on. I have essentially two versions each with a profit lock-in and an AIM-type variant:
1 TurboVest Version. This version allows essentially equity credit trading when equity prices drop.
The Lock-In version. Allows equity credit trading using priorly build-up Portfolio Value. As prices rise the profits are locked in at a specified pip-level.
No selling occurs on the way up. This is the Let The Profit Run strategy. Very effective for a long rising trend. Each time the next pip-level is reached the portfolio value is locked in like a Click Fund does. It creates super high profits relative to the underlying equity.
The AIM-Type version. Selling and buying as is typical for AIMing. This strategy, along with the equity credit buying is extremely effective for down trends and trading range investing. With the investing with equity credit one essentially sets up a leverage just like is already normally used with Forex trading. With this technique one can safely sustain price drops in the 50% range and more up to the point equity credit is exhausted.
2 The Zero Limited Reserve Model: The Reserve is blocked against becoming negative . This is for investing without using any equity credit. In the extreme this version would protect the investor against going into debt.
Just as for the TurboVest version there is the Let The Profit Run version and the AIM-type version. For ordering these Excel programs see:
http://www.vortexcw.nl/vortex/index.html ------> Order Form
As AIMers already know, the frequent buying in the dips for safe equities is a very powerful way to maintain or even increase the base value of their portfolio during the down trend. The TurboVest method is an extreme form of the standard AIM technique. . . the essential thing in AIMing is to preserve the base investment value during low prices period. Turbovest goes a step further by letting the base value of the investment increase as the price of the equity drops. This is especially attractive for trading currencies, as they do not easily drop to zero value an never do if you stick with the main currencies.
Today an Forex associate send me an interesting article on an investing method like TurboVest. It is called the Martingale Method. I say interesting as this method happens to be essentially the same as my Vortex Method. It appears that things that are essentially “self evident” periodically are rediscovered by people that simply are faced with the essence of investing when investing is stripped from the “tinsel” that surrounds it so often. The article in this link explains the Martingale Method essentially in the same way that I explained the power of the Vortex Method aggressive AIM-investing in my book The Vortex Method. See for yourself here what it amount to:
http://investopedia.com/articles/forex/06/martingale.asp?partner=fxweekly9
This article presents the essential mechanism of Vortex AIMing better than I have ever done it. You will probably end up saying, like have dome so many times:
“OK, OK, but is this not something that any 10-year old kid already knows? Buying Low & Selling High? . .is it then not obvious that if you buy twice as much at low prices that you make twice as much profit as the price is high again?”
Hey!
What about my 291 % ?
(8% in 10 days)
Grabber, you "grabbed" me with my pants down!
Hahahaha. . .I do not know if the chart you showed is right or not . . . it could well be, or it may not.
I should have written: if your chart can predict the future correctly (which of course it can not)
Often I make jokes about what people say instead of what they mean. . sometimes they say hilarious knee-slapping things and at other times they say completely idiotic things for which they should be keelhauled!
Now its my turn to be laughed at!
I suppose I am human after all. . .
Hi Grabber, if your chart is right(which of course it is not) then we should save the dough now (sell a bunch)and invest it all on Ground Hog Day. . my Birthday!!!
I can't imagine looking so far ahead. . I have started something that will soon turn into day-trading with FOREX.
I just closed my account on the EUR/USD Turbo Short with a 9-day Run: ROTAI = 291 % annualized.
Details on http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41212609
Now I have set my eyes on FOREX Trading with my Vortex FOREX Programs as guideline.
Wish me luck!
Don't cry for me if I go down a Vortex Sink Hole!
Maybe instead I will ascent into the clouds, being lifted rapidly though Vortex Tube, inside a tornado. I will float down once in a while wearing a white shroud and a halo on my head, to see how mere humans are spending their days
Report on my recent Forex Trading:
In August I started a Turbo EUR/USD Short Using the Vortex Method,
Windows program:
Stop-Loss 1,4448
Bought 100 @ € 3,28 on 25-08: Trading cost € 10 per trade
Bought 20 @ € 3,08
Bought 50 @ € 2,81
Sold 70 @ € 3,47
Sold 100 @ € 3,75 on @ 09:30 of 04-09
Closing price € 3,90 @ ~17:30
No Reserve was used in this Run. Cash Input equaled the required payments for the trade, at the day of buying. At the day of selling the net return was taken out as cash. This way the Vortex AIM Portfolio was at zero cash for the 9-day run and only the equity was on account. No interest earnings.
Total trading cost € 50. The €10 cost per trade is added to the equity purchase price at the time of the trade execution.
Results
Profit € 37,80! . . . I am going to buy a T-bone Steak Dinner with it!
Time average investment TAI= € 424,34
ROTAI= 37,8/424,34*365,25/9*100% = 362 %/year (Simple interest method).
The Vortex Window Program uses a conservative method to calculate the annualized profit percentage: compounded interest in order not to overstate the ROTAI-percentage.
The Windows program calculated an annualized ROTAI = 291%
This was a 9-Day Experimental Run. I had never looked at a Turbo in my life but I took a few day to look at how they work and the I dived into it with € 338 to start with, just for fun and games. . .finding out the hard way!
I speculated on the EUR/USD behavior on what the European and American markets were doing each day. . not an analysis on the basis of all sorts of numerical market "signals" (I don't know any), nor did I look at the x-day average price(would not know where to look and I did not want to calculate it) . . .This approach gave me a "gut feeling" of how the Eur/Usd Ratio would probably react. Mostly I right.
On Thursday evening 03-09 I looked at the European and American indexes and all over the place I saw a mixed market . . I did not look at any specific fund but just at the Red and Green on each Index’s Stock List. I saw nothing that gave me any clue which way the EUR/USD would move(neutral market behavior). The Turbo price had closed at € 3,50. The mixed market gave me the "gut feeling" that there were no negative signals. I am an optimist, like Americans are , so I bet on a positive move with a higher Dollar Trend. Considering that I was already planning to start a Forex Account with Oanda. . .this Forex Broker was recommended to me by 2 (a Dutch & a Canadian) Forex investors I know. It was time to close the Turbo(too expensive to continue that with the high trading cost as a EUR/USD rate drop would rapidly wipe out the investment. With a Forex account the trading costs are very low but just the same the investment can be wiped out quickly with a wrong bet on the index behavior but at least one can trade in-out often at just the Exchange Rate Margin cost.
My other investments(Mutual Funds) appear to be nailed to the Exchange Floor and are not all interesting . . .ZZzzzzz. .
I have ordered a Sell for the works, to get the money into something exciting. . . With my luck they will both open high on Monday when the Amsterdam Exchanges open!
The Next Adventure: FOREX Trading!
Karw,
The formula you can use for average share cost in the spread sheet is for example
SOM(I13:I55)/O55 . . . . (Net investment for 43 data lines)
I= Equity cost(+ or -) for each trade
O= Number of shares at the end of the run
You do not need to consider the cash first and then subtract it again. . .the sum of the equity trades is already available in the spreadsheet.
Of course you could ad the trading cost to that sum as I mentioned before and interest on cash could be subtracted form it as well.
Karw,
That conclusion on the mixed fund is about the same I hear about all mixed funds: Ergo. . .nothing new. That does not mean I think the fund is not a good one though. . it may well be.
In finding a simpler way of doing something I can remember something similar in the discussion on how I developed the Multiplier "M" in my Vortex AIM
M=1/(1-f) -------> "f" is the aggression factor: f < 1 *
for (Trade Amount) = M*(PC-V)
I sweated "peas & carrots" on figuring out hoe to eliminate the Residual Buy in the Lichello buy Formula and discovered a series expansion that ended up, for and infinite sum of additions
SUM= 1/(1-f).
Then shortly after I proudly explained how I got it Qarel, the other Dutchlander on this forum, showed us a simple short algebraic equation by which the same result was found! I was really surprised (to put it mildly) that his equation was so brilliantly simple.
PS
* If f > 1 the formula works as well, but it would be bit counter-intuitive at first:
1) It would give a Sell Advice when prices are dropping---> Great for Enron-Type investments
2 It would give a Buy Advice if prices are rising----> Great for investments in a strongly rising market (or for insiders)
3) With f=1000 or so it will give a Hold Advice for B/H investors.
So, simply by selecting the appropriate "f-value" Vortex does the right thing for anyone
The irony of this is that one should already know ahead of time what he want to do and if he does then he does not need an AIM-program to make money with investing. . . all he needs then is to "be in touch with the underlying equities" and shoot from the hip...like a John Wayne. . .or else like a Lucky Luke!
Error correction!
I wrote:
This AIM-effect is accelerated with my Vortex Method using aggressive dynamic trading and once more decelerated by my TurboVest Method for super fast reduction of average share price.
Obviously decelerated should be replaced by accelerated
TooFuzzy, Karw, Anybody!
I predicted the future
On Friday I wrote:
I am walking on the edge in this one.
Let those so called "wise" sayings not stifle the sense of adventure! I suspect that the EUR/USD Index will be € 3,50 on Monday.
Now it is your turn to be adventurous: "What will the EUR/USD Index be on Monday at 09:30 Amsterdam time in your opinion?"
I expected the EUR/USD Index to drop this weekend on account of the market rise in Europe on Friday and an expected drop in market prices in Europe on Monday.
I had bought 50 units EUR/USD Turbo short 1.448 @ € 2,81.
A few days earlier I had bought 20 units @ 3,08.
This weekend I gave an order to sell 70 unis @ € 3,00 limit.
This morning I woke up and the Turbo price opened at € 3,47 and the Sell was executed at that price ! The price rose to 3,50 and started dropping again.
I was right on the money!
This moment (12:16 Amsterdan Time) the price spread is 3.31 - 3.34
@ Karw
I read the story on the link TooFuzzy provided on the Fund
http://www.cmgfunds.net/sys/docs2/11/Introducing%20CMGTX.pdf
that was "interesting" according to you. I tried to figure our what they were actually doing but I could not fathom any of it and all I got out of it was a hocus-pocus story about money managers using secret techniques. . .the ususal spiel when people do not want to tell what they do so they only tell how good their system supposedly is.
What did they say anyway?
On the average share cost for an dynamic trading system: Is that not a trivial issue? It was already discussed ages ago before AIM was invented, using the prior basics of Dollar Cost Averaging?. . . (Equity Cost+ Trading (Cost)/#Shares)
Lichello used DCA as a launching pad for his AIM. Simply by recognizing that at low equity prices extra units equity were acquired and more units at high prices does AIM accelerate the effects of DCA by increasing buys at low prices and selling off a high prices the DCA principle was accelerated.
This AIM-effect is accelerated with my Vortex Method using aggressive dynamic trading and once more decelerated by my TurboVest Method for super fast reduction of average share price.
I think you might change your name to "TooClear"
You are right on the money:
If you can be smart enough to work to create the elements that makes the world a better place to live on than you are doing something worthwhile. . . provided that you limit your endeavors to activities that are generally beneficial to mankind generally. . . one can also be smart and do only those things that are detrimental to most of us, and that may kill us in the end.
I feel however that we progress by virtue of the fact that we evolve on the general basis that we all want to survive and that in the end we choose between options that are the most likely to provide the means for survival. .we have already done it for the few years since crawling out of the Swamp and I bet we will survive if we are not vaporized in a super nova in the future.
In hat sense "the games people play" are the games that will ensure survival.
Hi "Not so Fuzzy",
My own personal feeling is that there is a difference between investing (no matter what the price does you still own something that generates income) and gambling (a zero sum game where in order for you to make money someone else must lose and the only one who makes money overall is the house). This applies to options and other derivatives.
An interesting point to ponder.
If one digs deep in all human endeavors he discovers that much of everything "we" do comes down to just that: an apparent “zero-sum-game”. . .someone is "losing" in order for the other to "win”. Look at all the things "we" make and sell. . . much of it appears to be absolutely useless junk that people buy because they have money to burn or desire with a passion, like people desire a piece of carbon in a ring or on a chain. . .This particularly counts for "fake" elephant tusks. . .not to speak of the real ones for which people are prepared to die!
Why do we need 300 different types of cars while many people are on the verge of starvation? Why indeed do we need cars that cost 1 million Euro and can hit 350 km/h? Why are people on welfare not taken care of better so that their lives would become a little less miserable? . . .I am not, of course, talking about welfare Holland. . “we” on welfare here can do quite well surviving in comfort. . . if we do not buy to many things we do not need that is. . .We even get subsidies to pay the rent of our house, and when we get sick there is cheap health care, although some people still complain. . .of course, as “cheap” is also relative.
Why is poker on-line so popular now? The Champion goes home with a stack of 4 million dollars. . .or 2.793296089 million euro . . and it appears no more than a zero-sum-game.
I suppose games, like poker, are a form of human endeavor of the sort in which the lions got a fair chance in Rome to eat Christians, among others. . .a lion could possibly have lost a fight. . .the word "fair" can be interpreted as you like. . .we do that all the time anyway. Is it fair that Warren Buffet and David Trump and other have so much dough and the people in the gutter have noting?
Can you imagine a world in which what we call zero-sum-games are eliminated? This beggs the question: "Is a 'zero-sum-game' by definition an example of an evil game of "the games people play" or is it an necessary element in human survival?
Suppose you want to build a new home in a different place and want to buy a piece of land there to build a house on it but you are not yet sure you can sell the house you already have, so you take an option on the land purchase and in the end you can't go through with the deal. .You loose the money: the land owner takes it from you and sells the land to another. . .a zero-sum-game it was. . .wouldn't you say? No product was manufactured! . . .no process got improved! . . . not a human or a beast got fed after everything was said and done! . . .some wheels have been spinning and nobody went anywhere? Right?
It’s just a thought that struck me(some time ago already): Possibly the people that win the money in a "zero-sum-game" are more effective in doing something useful with it than the guy that lost it. . maybe. . .just maybe, that is the very process that makes the world a functional place for everyone to survive on, or at least may make it possible to make the world a better place live on in the end, rather than just a place where life could not develop in the first place.
When the lion feeds, why is it not a loss to the world that his prey died for it?
I have concluded that investing is a fundamental human endeavor for making things grow better or creating something by which we can live more efficiently, and that is better than dying: without investing the human race would die out. . .many animals invest time and effort for surviving the winter. . in fact that appears to be all they do. . .invest to survive. . .for people it is no different.
Derivatives of any kind are simply part of the things we make in order to play games we play and these games are not intrinsically zero-sum-games. . .no more or no less than making a knife or a gun is intrinsically bad. . .it would help us surviving a winter.
Derivatives are just tools and not in themselves bad but using them in an evil way one makes the game he plays an evil game.
Back to my renewed efforts in derivative investing at this moment: I am particularly ineffective in doing something useful with money I earn. . . I have always spend it in ways most people consider foolish. . .so, it is a good thing to do as I do it as others that take the money away from me, as I play the games I play, are maybe, just maybe, more capable to putting it to work effectively and so protect the human race from extinction
I am just doing all this to survive!
Well, TooFuzzy, there are thousands, if not more, so called "wise" sayings that usually means nothing more than sayings from people that were not so wise after all because these sayings are based on global observations of mass behavior of the general population. . .a behavior that is driven by ignorance and fear. . meaning of course: The saying does not apply to people that are 1) not ignorant and 2) are fearless, as far as the saying pertains to a particular subject
This of course means that people that are fearless in one situation may well fear other situations. . .for example a 13 year old girl may be fearless in regards to sailing solo around the world but may fear snakes. . . you probably have heard about the Dutch 13 year old about which a Judge has decided today that it not necessary to remove the parental jurisdiction over this girl saying sol around the world. Something that would apply to 19,9999 % of parents of 13 year old girls does not have to apply to some girls that know more about sailing than 99.999% of the adults the world. At the same time this 13 year old may know less about surviving if while sailing the weather becomes rough or when she encounters other perils she may know nothing about.
In regards to investing it is no different. I know exactly what I am doing but I may not know enough about how a turbo generally moves in order to make a bundle the first time around. Just like the sailing-girl does not know enough about the detailed “weather mechanics" she is prepared to take the gamble that it will not get worth than she thinks she can handle. . . my situation is no different I am willing to gamble some money in order to learn turbo investing on the fly: I know what I am doing but do not know enough about “turbo mechanics”
I feel the USA has a great power to recover and therefore I gamble that the EUR/USD Index will drop before it hit the Stop-Loss. Today the EUR/USD Index and the value of my turbo dropped. Mostly due to a rising trend on the Dutch AEX Market. A great time to invoke my Vortex AIMing Method and buy extra. . .I did at € 2,81 knowing exactly that I wanted to gamble on a rising trend in the USA in response to the European markets. I figured that Americans would be inspired enough by the rise of the Euro so that later today the Dollar would gain in prince so that the EUR/USD Index would drop again and stay low over the weekend to drop more on Monday when Asia and Europe had realized that they were too positive on Friday, so that the EUR/USD would drop further yet. My Buy @ € 2.81 at midday, before the US market opened, will then pan out. If I am wrong my position might have been be liquidated at the closing time of the marker. .now about 2 hours ago. . . I have not peeked yet at the closing price, so I do not yet know if my “educated guess” paid off. . .I am not going to speculate as yet what “educated” means in this case J.
I am walking on the edge in this one.
Let those so called "wise" sayings not stifle the sense of adventure! I suspect that the EUR/USD Index will be € 3,50 on Monday.
Now it is your turn to be adventurous: "What will the EUR/USD Index be on Monday at 09:30 Amsterdam time in your opinion?"