is retired now but still kicking like a horse!
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Hi Pragmatico and AIM Testers,
I will make up a list with results showing the responses and the specific AIM Settings that people report. From that we might make some interesting conclusions.
Pragmatico’s results appears similar to my results. It differs substantially from two responses with a very high Result of over 32 000 (without having their cash go to zero!). At this time it is too early to conclude much except that all techniques to improve performance are permissible except those that are using intermediate parameter tuning.
I like the 4-D Pragmatico optimisation description using the Mountain Peek analogy. Pragmatico, did you do this manually or do you apply an automatic optimiser?
With using the PC Update and other parameters we can essentially think of using X-D optimisation for this Test Reporting:
Buy/Sell SAFES(2)…(As used by Lichello)
Buy/Sell RESISTANCE(2)…(As Simply a Hold Zone Filter)
Minimum Buy/Sell(2)
PC-Buy/Sell FEEDBACK(2)...(As Used by Vortex and Hybrid ??)
Cash/Equity RATIO(1)...(Not variable in this test)
Buy/Sell MULTIPLIER(2)...(Overlaps the Vortex Feedback)
???????(??)
These variable parameters are not used identically in different AIMs. It is therefore my intent to list them in the different ways they are used. For example, I used the RESISTANCES on the equity value by mistake instead of on the PC-value. The Resistance parameters can therefore have multiple definitions.
Suggestion for other parameters that some of you are using are welcome.
Conrad
Hi TC, Interesting results!
Your end result of 32 232 is in the Ballpark that Ergo Sum Reorted (using 5000 minium cash!)
Your settings(5,20,3,2) ????
5% Buy Safe ??
20 Sell Safe
Are the "3" and the "2" the minumum buy/sell Trade sizes?
The result looks good indeed. With my settings I get # 26 149
so far.
In retrospect I mention that my Buy Resistance sits at 25% and the Sell Resistance at 20%..of equity value instead of on the intended portfolio control. I will report back on this if this makes the difference.
Conrad
Tom, Re Interest and Costs,
Trading Cost and Interest Rate vary widely. I would accept any practical boundary condition that you would suggest. The only thing I want to achieve is that cost and interest rates do affect the optimum parameter setting.
I understand also that in the US you pay taxes on cash but not on stock holdings. In Holland this has recently changed...we pay tax on stock just the same as on cash!
If you prefer we can eliminate costs and interest so that we see only the effect of the AIM.
Conrad
Hello Ergo Sum,
I have the salt ready!
Let's first of all agree that a Test Case needs to mimic reality to some extend but need not to be a typical to represent the stock market as a whole. The fictitious stock history has good volatility and is therefore is a good Aim stock.
As for your results
Depending on your system structure, and the parameters you used, you will get many or few Sell/Buy Orders near peaks and valleys.
The question now is, if your system, with your parameter settings that you normally would use, gives indeed an end result of more than 34 000 then we like to know:
1) Is your system an AIM version you actually use and how does it work?
2) Did you use Trades as calculated by the AIM Buy Advice & Buy Order structures or did you adjust the Buys and Sells on the basis of your feeling using the know-how of the stock's future? It is easy to peek ahead at the dips and peaks and adjust the Buys and Sells accordingly. So, if you used prior know-how of the future then you are doing simply something you would not do with real stock. For example restricting the Buy Resistance in advance may force the system to buy only at the lowest dip, and you can make your system act as a Perfect AIM.
So, think about this, and try to look at this exercise as a System Test and not as a demonstration that your would make $ 14 000 profit on this type of stock if you ran into it...you might get into a volatile stock that fizzles out right after you bought it.
Anyhow, your yield of + $ 14 000 looks good, but you mentioned that you never went below 5000 in cash. This means essentially that you played with a 15 000 investment and ended up with $ 29 000, or a yield of 14 000 on the 15000 investment(93% ROI)...What type of a secret do you have?
Suggestion: Start your AIM at 15000 total 1/3rd cash and see what happens.
Regards
Conrad
Tom's Graph for AIM BTB-AIM Testing Reference.
Hello Tom,
Your Graph of the AIM BTB looks good. I will await your comments on my question in regards to nudging the BTB AIM towards zero cash as discussed. Your Graph looks quite similar in shape, generally, to the Vortex Aim Graph, as was generally expected.
In case you will adjust to zero cash than it will be interesting to see is the Portfolio Ratio's will change any.
I have added the cash 5% interest earnings to my algorithm.
As a first analysis of the two AIMS I list the [Vortex]/[AIM BTB] Ratio's:
Portfolio 1,139340334 Value = $ 26 149 at Week 85
Cash 1,353085511
Stock 1,021621622
Hi Tom, AIM BTB,
The AIM BTB as standard is a good idea.
You are faster that the speed of light on your return comments! Ok let's make sure that we understand each other. I list here my Feedback Points:
1) The cash in the AIM is compounded weekly at the basic annual base rate of 5%...per week 5/52%;
2) The Test Reference to the bank account is removed as we use the AIM BTB as Reference.
In regards to this Reference it may be possible to optimise the result so that at least one point the cash is zero. Although we would not always do this in reality, for the Test Case it would be a good thing to do to the extend that the use of the Lichello parameters make this permissible. Now, this indeed a moot point: If the Lichello BTB does not allow for adjusting the SAFE to say 11 %, to get a better yield, or it does not allow the use of 52 % or 46% update on the Portfolio Control then we accept the BTB as reference...This all depends on the definition of AIM BTB.
Tom, this is your call.
Regards,
Conrad
Tom...On the Test Proposal,
You are correct with the 50/50 cash equity ratio. The 5% I mentioned is to compare the 20 000 investment in a bank account. Roughly this would earn about 1600 on interest on the 20000. The 21600 end-capital is simply a reference.
There are reasons for arguing that this is not a good way of comparing an investment, as there are better ways of putting the cash away than savings accounts.In this test the reference investment is actually not important at all, but as a creature of habit I have simply included it. It is an effective tool for people that are used to bank account "investing".
Now that you have raised the question, the yield of the cash in the AIM should also earn interest while it is not invested. I have not yet build that into my excel test model. In the Vortex AIM this is done, but for this quick Test I need to calculate the interest earned from the cash in the AIM.
Do you agree that the 5% weekly compounding is acceptable for the cash portion of the Test AIM?
Conrad
AIM Testing,
In regards to various parameters you folks may be using in your AIM I like to add that the Test refers to the Basic AIM structures that do not include stock pattern recognition features. I consider that a form of Auto Tuning. It is up to the ingenuity of any investor to think of these things to his advantage.
It would of course be interesting to know if any of you have such auto-tuning features and to find out how much better your system would perform. So, by all means, if you have such features in your AIM, please do use them, but let us know you did. Your result with auto-tuning would mask any effects of your AIM without the auto-tuning. You should therefor do both: Run with Auto Tuning ON and OFF.
I might add that setting the SAFES, or whatever you do to to create a Hold Zone, is not subject to limitations as long as it is not done via auto-tuning during the 85 week run.
Regards,
Conrad
AIM Testing-The Final Frontier
In order to test the Vortex AIM we had some discussions on doing this recently. To arrange this informally will likely be to time consuming to do, and possibly the Yield/Effort Ratio will be low.
So, I propose a simple test:
I provide a simple "stock" history for 85 weeks and anyone can
let his system take a go on it. I only have a few simple rules in order to be able to compare performance on the basis structure:
1) Capital: 20 000 Dollars or Rupies...whatever;
2) Start-out cash at 50% exactly;
3) Trading cost: 20 Fixed Cost + 0,6 % of Trade Quantity;
4) The cash reserve may not be negative at any time. How you prevent this is your choice...You could implement a Buy lower than the calculated Buy Order and than inhibit buys until there is again cash avaialable;
5 No Intermediate Parameter Tuning. That simply means that the Test AIM should not have auto-tuning features.
For example, if you set out with a Buy/Sell Multiplier(Beta Factor as used by Automatic Investor) of 0,3 then this factor must remain 0,3 for the whole run of 85 weeks. Adjusting parameters in mid-stream is cheating...(for this test only!);
6 It is allowed to Optimize your AIM by trying out different parameter settings and to run the system as often as you like to get the maximum Return On Investment. This is not possible with real stocks, but this is a Model Test. It will provide a comparison for AIM System operation. It is clear that this optimization might result in inferior performance for a different share price history. That's OK. The idea here is that if you think that a Buy/Sell Multiplier of 0,6 is better than 0,3 then you run it again with 0,6. As simple as that.
Here follows the share history:
Week Share Port. PVort.. Week Share Port. PVort.
No. Price Value Value. Nr. Value Value Value
1 $100 53 72
2 $109 54 69
3 118 55 71
4 129 56 74
5 134 57 69
6 115 58 71
7 115 59 70
8 120 60 75
9 118 61 80
10 112 62 80
11 100 63 79
12 90 64 84
13 75 65 84
14 70 66 88
15 75 67 89
16 78 68 95
17 79 69 97
18 81 70 94
19 78 71 93
20 89 72 95
21 84 73 97
22 87 74 103
23 90 75 105
24 95 76 109
25 99 77 113
26 104 78 115
27 110 79 118
28 113 80 113
29 113 81 109
30 111 82 110
31 114 83 107
32 115 84 105
33 118 85 100 25 343
34 115
35 113
36 111
37 104
38 100
39 99
40 95
41 94
42 91
43 88
44 86
45 81
46 86
47 79
48 75
49 77
50 77
51 76
52 73
Barry,
Regarding my question to you about the SA being similar to the TA for the Sell Mode, you are quite correct. I realise now that in the Sell Mode the SA has a similar problem with a Residual Sell Advice due to the reduction of the Sell Order relative to the Sell Advice! Good Point!
In regards to TANGENT message ¾ I do not quarrel with your calculations. I do observe that the practice of letting the SAFE enter into the magnitude Buy Order using the factor (1+B) or
(1-B) makes everything cumbersome and less than lucid. Now, I know that the Tangent AIM and the Hybrid AIM are intended to be improvements, I question if it is not simpler to only use the SAFE only as a Filter to decide: To Buy or Not to Buy.
After that is done it would seem a simpler method to temper the SELL or the BUY with a scaling factor:
For any share price Outside the Hold Zone
Buy=(PC-Y)*S
Where the S is chosen simply as a scaling factor.
Now for the Buy Mode in your Hybrid AIM
This is, if I understand it correctly, identical to the Vortex Method in that you arrive at a the same solution as Qarel showed some time ago:
PC + C1*Advice=PC + C1*C2*Advise (Vortex AIM terminology)
This results in G = N (Hybrid AIM terminology)
This makes your Hybrid AIM essentially the same as the Vortex AIM, as instead of using A=0,5 you can just as well use A=0,2 or any other permissible value.
Now, mind you, I do not conclude that the HA is identical to the Vortex AIM. In using the SAFE mixed up in the calculations you have essentially something different, and possibly this has some practical Effect that I cannot figure out yet.
In any case, I find it very interesting that your effort attempts to have the motivation to eliminate that irritating Lichello Feature. Now all we have to do is to find out if there are any advantages, other than the obvious one of elegance!
I will attempt to post a stock history on the Board that you and others can use as a short Test Case. The idea is that anyone use the stock history to get a Yield at the end of 85 weeks running. At this time I have no rules for the test other than the the boundary conditions be the same...Be my guest. I hope I can put the stock history on the Board.
Regards,
Conrad
Hi Rico,
You wrote,
Or Mr. Lichello was more of an arithmatic teacher than a math professor, as it would have taken quite some time to figure out the B=1/(1-f) formula out of those repetative (infinate length) updates in the Vortex method. It's probably some kind of standard math formula, but I'm sure he didn't want to open that can of worms. Based on his desire for simplicity and paper and pencil work against the luxury of computers. To each his/her own.
As it happened the infinite series reduction to B=1/(1-f) is indeed a standard formula. But for my considerable work to come to that point there is also a rediculously simple solution that Qarel pointed out to me some time agO:
(1) PC+ Buy=PC+f*Buy=Y3
(2) Y3 = New Equity Value and
(3) Buy=B*(PC-Y2)
Equation (1) reduces to an equation with only one unknown B and gives the answer quite without any mathematical pains!!!!
B=1/(1-f)
I will see how long it will take to get the revised issue of the book published.
Conrad
Hi Barry, On Tangent 2,
I find the representation a bit difficult to follow because of the different symbols you are using.
Anyway,
You point out that the Hold Zone for the Lichello AIM is not symmetric. That is not in principle so, except that the use of certain calculations makes it so. It is not a necessary condition. With some simple adaptation you can make it symmetric without loss of functionality.
Your example of calculating the value of Tangent Sell does in my opinion only eliminate the Sell Order but not the Sell Signal.
You write:
First we see that F/(1-S) gives 10,000 and M is greater so that we do indeed have a sale.
Either using the above formula or the SA approach (i.e. sell advice plus safe adjustment) we find that
X = 1,800
N = M - X = 12,000 - 1,800 = 10,200 which implies another sale
But 1/(1-S) = 10/9 in SA ... thus
Y = X * 10/9 = 2,000
and
M - Y = 12,000 - 2,000 = 10,000 which implies no sale.
So, with F at 9000 you still have (9000-10000)=-1000 Sell Signal, but because this lies within the Lichello Sell Band you conclude that there is no Sell Order. OK. That may be true. But this is also true for the Lichello case, is it not?
For Lichello the Sell Signal is (F-M) and the Sell Order is made a little smaller by the SAFE. If you then execute the Sell the next Sell Order is smaller than the original, and lies under the 10 % SAFE Limit.
So, we can conclude that for Selling there is essentially no difference between the Tangent Method and the Lichello Method?
Conrad
Hi Rico,
We appear to sit on one line with respect to the idea that the 50% Pc-Update is not a sacrosanct number. Various people already play with that. As to your observation that with a 100% PC-Update you get a Buy Order right away this is true but with a 50 % or 30% Update there is also immediately(at the same share price) a Buy Signal of the magnitude (PC-Y), and this is half of the magnitude of the previous Buy.
This "flaw" is not in principle a big problem although an irritating feature as the investor must tell himself not to act on this Buy Signal. The important thing is however that with the 50% Buy signal many AIMers feel that the Buy Order that results from it is still too aggressive! This is my reason therefore to make the PC update-percentage a free programmable constant. More interesting is the fact the in my PC-Update I get as result PC=Y for the case that the Buy or Sell is executed according to the formal calculation for the Buy Order. Outside of this range, thus when the factually executed Buy Order is larger or smaller than the calculated Buy Order I use a method for updating the Portfolio condition so that the end-condition of the portfolio is exactly as the investor wants it to be. These matters are used for example, for adding cash to the portfolo, or taking the cash out if my personal Cash Burn Rate as defined bij Lou Dino, is forcing me to!
In regards to the fact that Lichello has died, yes, I was aware of it. Sometimes we allude to people that have passed on as if they were still watching us. I used that writing style.
With respect to the book it is still available but I have to dig out the master copy. I am rewriting it in Dutch as well as in English.
On gambling we could perhaps set up a separate discussion. I do not gamble, except now and then for fun(Buying some AND Stock for 1 cent/share is pure fun), and sometimes in a moment of temporary insanity just to break the routine of the day-to-day-nose-to-the-grindstone routine of serious adult matters...An adult is someone that has forgotten how to be a kid. That's why I want to escape every now and then and do something I do not need to justify!
Regards,
Conrad
Cowboy,
I understood what your were doing except that your explanations made it not clear as to what you wanted to achieve...it was a discussion on a better name for the PC, not specifically on what was happening.
Besides that, when you talked about the shift of the Neutral Point it appeared to me that what you were talking about was the translation of the Neutral Point that occurs when you use {PC-SC*S} as a Buy Order as a transformation from the Buy Advice. That is a shift of the Neutral Point so that the your PC is no longer your Neutral Point. That is the inevitable conclusion of what is happening, and this has nothing to do with the shift of the PC after a Buy or a Sell have been processed. To me this shift is actually the most interesting thing, as it point out a fundamental difference between the tow AIM-forms! I believed that this was why you discussed it as well.
What is very clear is that what happens to he Neutral Point before the Buy/Sell Action is a completely different topic
than the mechanism for updating the PC after the Buy/Sell.
So, we both know what we are doing, and why we do it. The discussions on PC/N or PC/(1+s) is simply les relevant in this because it is simply an way of defining a point. In the Vortex AIM similar calculations are also made, but they do not form part of the explanation.
These discussions prove all the more that we need to transmit pictures in order to eliminate thousands of words. But more important is that in these discussions all of us tend to be far too informal and mix up various different words that mean the same thing, or we use words that have two or three meanings.
Thanks, anyway, for your efforts to make me see your light!
Conrad
Sunday on the I-Hub
Doesn't anybody have anything serious to do?
See Ya tomorrow!
Conrad
Hi Barry,
No one promised me Life was going to be Easy. I was told in Sunday School that if I became a sinner I would be punished later on.
I think that maybe I have become a sinner after all!
Regards.
Barry's TANGENT AIM..Tom??? ET??? Lou???
Sounds Great, Barry.
I have a habit of reading and responding 'on-line' but my line is overheating, now that the I-Hub is shifted to Turbo Mode. Next to my Vortex Method I also has a Turbo Method. It's is perfect for the Cash Burn Rate the Lou Dina has invented...Yeah, the one that Tom Veale is going to optimize....Tom, forget it..The Turbo Method is made for Lou Dina
Barry, I will go off-line now(after I have chased the end of the current stampede of messages) and read your stuff carefully...that is, if ET and I are not Going Home yet....I have to prepare some stuff for ET about stock picking. If that keeps him from Going Home then it will be worth the trouble.
Conrad
Hi Lou,
You's made my Day. I am still in cramps...
I read that if you can't burn the cash fast enough you will shoot your wife! Don't take it out on her. Its not fair!
...or maybe you meant that your wife will get a shot at it?
ET,
Let's Go Home!
Conrad
I Quit!
The damn thing "greater than" disappeared again!
I am going Home, just like ET
Conrad
Tom, Second try. I keep hitting the submit button too early.
The amount of your perseverance for solving our Boards
problems my patience to solve it. Well, it appears to work this time...
Maybe my patience has increased a bit!.
Thanks,
Conrad
Tom,
The amount of your perseverance for solving our Boards
problems c < x my patience to solve it. I tried various options. I even copied your example.
"greater than symbol"
x*y/z a/b*c
a/b*c < x*y/z
Maybe leave spaces either side of the "" and the rest of the equation.
Thanks,
Conrad
Thanks Tom,
I dabble a bit with Excel Graphs, but I can't paste them on the I-Hub(to eliminate thousand of words). Anybody know if this is possible?
Now you have provided us with feed for a new discussion. If Lou Dina is burning his cash, does this mean he has so much of it that he is using it as a fuel?
Cash Burn-Rate Optimatzation will be an extremely important topic for the Biomass Energy Industry. As you know in Europe there are Mountains of old cash to burn!
Maybe Lou can help us do it more efficiently?
Conrad
Re: Modern Portfolio Theory.
Don, that was an interesting reference to Automatic Investor. Thanks. I quote here my reaction to Mark:
Hello Mark,
I set out to make a short reply on your article about the Modern Portfolio Theory for placing it on the I-Hub but it
became an exercise for fine-tuning my position on rewards for investing...too long for the Board.
Instead you are my "victim" this time. See the Attachment.
I like your conclusion that the AIM strategy can improve the performance of the MPT via yield optimization for
individual investments while the MPT can do this for the Portfolio. You can only have concluded this by virtue
of understanding full well that the high ROI can be achieved only via a process of selecting a
high-yield investment category and by yield optimization application for selection of the safest of these
high-yield investments. It reinforces my battle for using rational investment objectives, rather than using fallacies, once again.
Now, I kept my promise. The R-Word did not cross my keyboard.
Regards,
Conrad
Hi Mathew,
Without going in to deep trance to work this out formally I will say that there is a simple answer. Normally you will keep the cash reserve in a savings account from which you can withdraw it rapidly. On this cash side there are several possibilities for maximising the yield on your money with a combination of high interest accounts and short term borrowing with the locked in cash as security. So, in this sense, you should never be caught with cash in your pants and always be fully invested. Your question indicates that you already see the logic of this.
AIMing is not so much a method of keeping cash at hand to invest at opportune moments but more a method of shifting capital to optimise the Growth Rate of your total Asset Base.
Coming back to your question, there is a general theory that as stocks dive in a Bear Market the yield on money assets rises. This creates an continuous tug of war between going into stocks with cash you pull from your money accounts, and gong into liquidities because of their high yield.
Your dilemma is not really a problem, for in the Bear Market you tend to shift your liquidities into stock, so you won't have so much money in the bond market to worry about it. However, to the extend that your money has not yet been shifted to stock you might be better off to transfer the money to a combination of a high-yield lending and short term borrowing for stock buying. This way you prevent penalties on your high-interest investment, and by borrowing only for short periods the borrowing cost remains low.
Now, this is the generalization. You have to do some work to fill in the details that you can get from your local bank. I myself stay away from the bond market as it does not fit my investment profile, so I prefer high yield liquidity accounts and borrowing(I use a special technique that allows me to buy the stock I want for AIMing with borrowed money and avoid the serious pitfalls of margin investing. My borrowing technique is especially effective for the AIM Buying Mode).
Justly or not, I "see" the bond market as boring and have the impression that it is very sluggish, meaning that high yield-money reacts much more rapidly to market conditions than the bond market does. It would pay you to simply compare the delay time for the bond market to react to the increased interest rates for liquidity accounts and calculate when the higher yield of the bond market you have in mind breaks even with your liquidity accounts. This way you can always maximise your liquidity yield.
I hope this will help you to start thinking about always being 100% invested, and at the same time, being able to buy all the stock you want as your AIM produces Buy Orders.
There is no need to run out of liquidity to buy stocks on the way down to the Big Dipper!
Conrad
Hi Cowboy,
I stated:
2a Your (PC-SV)-SAFE, which is the same as what Qarel states as (PC-SV*(s+1), so that for a buy (s+1)1
The last part of this shoud read, obviously, {PC-SV*(s+1)}, so that (s+1) is greater than 1.
I am still struggling with the text symbols. The "is greater" symbol simply disappears after transmission of the document. I need to find out how that symbol is to be typed in.
Regards,
Conrad
Tom,
I think we are on the same wavelength as far as AIMs are concerned.... the solution for a proper AIM Response for the Bull Market relative to the Bear Market can be solved with two different intensity factors for buying and for selling.
But now something more important. I keep asking myself "How does Tom make such beautiful charts?"...With such pictures I could explain my ideas without saying anything. That would save me a million words in a week.
How do you do it?
Conrad
OOPS...for Tom,
The Submit Post button was pressed too prematurely! I repeat the text here.
Hi Tom,
How much more efficient would our discussions be is we were sitting on the same table once a week!
So, Rico is a Dutchman too! All of us form the Dutch Connection.
I am beginning to see some light on Portfolio Control Addition discussion, but I think there might still be a case of talking about different things. Tom, on your Board you used for the Buy Order calculation the flowing example
Sell Order={Y- (PC+0,1Y)} and called (or you implied it, or Rico did that?) that as an Addition in the discussions. This is causing the tempering of the buying. That is the same effect as using 0,9 on the Y and then Sell Order={0,9Y-PC}.
Now, when I read Rico's comments about Additions he appears to refer to adding 50% of the Buy to the PC in order to get a new PC (the Positive Feedback concept). These two types of Additions are not related to each other. It made the essence of some discussions on Additions difficult to follow.
Now, after many, many discussions, I have come to the conclusion that the only significant core of the AIM principle is Lichello's idea of raising the Portfolio Control after a Buy and to keep it untouched after a Sell. This brilliantly simple Lichello idea results in the effect that the source from which investment growth emanates (The Base Investment=PC) is continually increased during the market cycles. The rest of the paraphernalia such as SAFE (as a Hold Zone), the freedom to temper the Buys and the Sell (with the SAFE or methods), to delay cash disbursements or to take profit early or to let it ride are essentially adjustments to make the operation of the system suit our particular needs or desires. None of these things are essentialities. I feel that, having read Lichello's book with great intensity(if not with 100% attention to detail) I sensed that Lichello was quite tolerant of all sorts of modifications that the user judged necessary.
Now with the issue of the Positive Feedback Concept my claim is that Lichello had no fundamental reason to use the 50 % of the Buy to add to the PC, to get a new PC-value. As I recall(it is about 18 years ago), he tried a 100% Addition and realised that cash would be gone in a Jiffy and that is what bothered him...How to prevent rapid cash depletion was the question that was tormenting him.
Then after some miraculous revelation from reading a old licence plate he hit upon the 50% concept a Golden Rule for averaging....100% was to much and 0% packed no punch. With 0 % addition to the PC the Equity Base remains the same over time and has only a causes a mild portfolio growth.
I state categorically that Lichello implied no magical meaning to the 50 % and that he used this only as a logical solution to his search for a less aggressive Buy Order Generator. My contention is that Lichello could just as well have chosen a 1/3 factor instead of 1/2.
Suppose that in his book 30 years ago or so he would have chosen 1/3. Then with
PC2=PC1 + 1/3Buy----- a lower new PC---- and this would have made the Next Buy much less aggressive than with the factor 1/2 instead of 1/3.
From this I conclude that the choice for the PC-Correction Factor 1/2 can legitimately be changed to free programmable
Constant...as was done in the software of Automatic Investor.
I would venture to say that the effect of playing with that constant is a much more interesting issue than playing with the paraphernalia of the AIM.
My challenge to AIM users today is to consider finding out the effect of using a pc-corrector of say 1/3 instead of 1/2. This would lead automatically to the question on "Do I still need to temper the Buy Advice in order to get the desirable Buy Order?
I predict that the answer is NO. As the factor 1/2 is reduces the Next Buy Advice gets smaller and the need to temper the buy Advice disappears.
That appears to me an intriguing issue.
Conrad
Hi Tom,
How much more efficient would our discussions be is we were sitting on the same table once a week!
So, Rico is a Dutchman too! All of us form the Dutch Connection.
I am beginning to see some light on Portfolio Control Addition discussion, but I think there might still be a case of talking about different things. Tom, on your Board you used for the Buy Order calculation the flowing example
Sell Order={Y-(Pc+0,1Y)} and called(or implied, or Rico did?) that as an Addition in the discussions. This causing the tempering of the buying. That is the same effect as using 0,9 on the Y and then Sell Order={0,9Y-PC}.
Now, when I read Rico's comments about Additions he appears to refer to adding 50% of the buy to the PC in order to get a new PC(the Positive Feedback concept). These two types of Additions are not related to each other. It made the essence of some discussions on Additions difficult to follow.
Now, after many, many discussions, I have come to the conclusion that the only significant core of the AIM principle is Lichello's idea of raising the Portfolio Control after a Buy and to keep it untouched after a Sell. This brilliantly simple Lichello idea results in the effect that the source from which investment growth eminates (The Base Investment=PC) is continually increased during the market cycles. The rest of the paraphranelia such as SAFE(as a Hold Zone), the freedom to temper the Buys and the Sell(with the SAFE or o
Hi Cowboy again,
Now I am getting it.
Your NP is PC and is what I called SP(Set Point)
At NP=(PC-SV) Buy Advise=0. You SV are the same as my Y=(Stock Value).
2a Your (PC-SV)-SAFE, which is the same as what Qarel states as (PC-SV*(s+1), so that for a buy (s+1)1
I understand what you are doing here, but with this definition under 2a PC/N is no longer a Neutral Point as seen from the Buy Order equation. The Neutral Point, as I see it, is the value that arises from (PC-SV)-SAFE=0. This gives a Zero Buy Order, and this results in the set point for the Lichello AIM being smaller than the PC-value. So far, so good.
For the Vortex AIM the Neutral Point = the pc-Value (The Set Point)
Then you go on to say:
The Neutral Point Must shift when ever you have a sell or buy! It is built right into the formula! When ever Pc or N change you will have a new Neutral Point. Just because it changed does not mean that it is not a Neutral point. The reason it is still a neutral point is because when the Stock Price = the new Neutral Point, the Buy/Sell Advice = zero.
I agree 100% with what you conclude, but then it follows that by eliminating the buys in the Hold Zone your have two Neutral Points. One lower than the PC to initiate the Buy Orders and one higher than the PC to initiate Sell Orders. Essentially then what Tom calls the Hold Zone is for you the Neutral Zone.
Right?
For the Vortex (pc-y)*F Buy Order essentially exactly the same is true. The Buy Order Limit is determined by the Buy Resistance, independently of the magnitude of (pc-y)*F and this establishes the Hold Zone(as the same argument applies to the Sell Order). This means that from that consideration the Lichello AIM and the Vortex AIM are 100 percent identical from an operational point of view, except that the choice of the Buy and Sell magnitude is a free choice for the Vortex AIM.
Having said this, that is also not an important difference as in the Automatic Investor the magnitude of the Buy/Sell can be boosted with the Beta-Factor, and all Lichello AIMers can choose to adjust the Buy Order and the Sell Order separately(as I am sure is done as well).
So in this discussion we agree on what is happening, and I think you will agree that on this point the operation of the Buy/Sell Engine is also identical, in spite of the fact that the magnitude of the orders has a different proportionality if compared to each other. I think that semantics have caused a bit of confusion as well.
I hope that in your discussion it was not your intention to say that the Vortex AIM the Neutral Point needs shifting. It does not.
Conrad
Hi Rico, Barry and Qarel,
(and a "Hello" to all others, ... I was the one from the "Portfolio Control additions" email to Tom on the SI indepth-disc. thread)
Could you explain something on what you call Portfolio Control additions. It might be an interesting subject.
I would think that Lichello would be pleased to hear that after his passing-on to other pastures many people still sit up night after night talking about his system and even using it on a rather large scale. John Keynes had extensive impact on economic policies in the U.S. but how may people are daily playing the market or business world with a Keynesian System. My bet is Lichello is already tinkering with something else that will leave his mark.
As to AND, I am chocked to hear that so many people want to buy in at 1 cent...I thought I was one of the few that had a order standing out at 1 cent...now I discover I am simply one of the stampeding herd. I guess I might as well forget about being the new CEO of AND. I have to start thinking about shifting strategies. The Casino is out...it's at least 7 km away. Should I buy a Lottery ticket ? No, the odds are stacked against me too much... 100:1 that I lose my dough. The Roulette wheel at least gives me about a 48/100 chance of winning...funny thing though how some people think.... they say: "If I buy more lottery tickets I have a better chance of winning. But I can't change it that people want to fool themselves much of the time the time.
When I tell the happy lottery gambler that he believe in a fallacy he at first is all ear....Huh, what do you mean?
So I let him suppose he buys only one ticket for 1 Dollar. Your chance of winning a price is real and you might be rewarded for the gamble you took...You might even get the Big One. Right?".... (Most people don't enter into a fight with me on that. A 5-year old will understand it)....Now suppose you buy all the tickets in the lottery and then you win every price there is, but you are 100 % certain that you have lost a lot of money...most likely a 40 % loss. Would that make happy?.... Silence.... Then I see the writing on the wall...the guy gets angry as hell at me...
Shucks! Why do you have to spoil my fun? I was so happy thinking that buying a lot of tickets was better for us...Two tickets for the wife, one for each of my 6 kids, and one for the dog. Now you tell me I have been wasting my money! Thanks a lot for nothing. You’ve spoiled my day.
After the science of gambling has entered this Board with the expose of Barry on coin flipping I thought I might follow through with an investment method with which you can earn money even though the changes of winning in this game are exactly 50%. But I am not sure if any one want to hear about it. I think I will tell it to Qarel. After all, he asked me first to let him in on a good deal if I had one.
Ah, no, nobody will want to know about easy money.
Forget it.
Conrad
Rien,
The point I was making reduces to the following:
1 I define the probability of a high ROI as Y
2 I define the probability of the other thing happening as X(The risk of not getting a high ROI).
In this, my argument is simply that in order to maximize Y you must minimize X as
Y + X = 1
Within this the order of magnitude of the ROI is not defined, simply the chance of it being high.
So, AIMing for a high probability of making good profits, implies Aiming for High Return investments(on the average).
Now, high risk investments perform poorly(on the average). It is therefore a contradiction to propose that Profits are the Reward of Risk as a Generality.
The issue that is possibly missed in these discussions is that if one focuses on what I call an idiotic proposition such as that "profits result from risk" then one does precisely the opposite as to what should be done. One should AIM for High-Yield investments rather than Aim for High-Risk investments.
The only thing that I add to this is that with skill one can seek out high-yield investments within a high-risk category, and that fundamentally means that all these investments that score well consistently are fundamentally low-risk investments.
How you identify the winners, and how you avoid risks, is a good question, but not relevant in this debate.
This is the last this I will say on Risk....(on this Board).
OK Cowboy,
This makes it crystal clear. The way you explained it, then I see it as follows:
1 (pc-y)=Buy Advice pc = Neutral/Set/Toggle/Trigger Point
as for y=pc the Buy Advice = 0
2a {pc-y*(s+1)}= Lichello Buy Order
2b {pc-y}*F= Vortex Buy Order
Therefore the Buy Signal is the same for the two methods and the pc is a toggle or trigger for the Buy Advice(Buy Signal).
From the perspective of the Buy Order function the pc is not a neutral point, nor is it a trigger point, as the Zero Buy Pointnow is shifted towards a y-value below the pc-value, as was shown by Qarel with his conclusion that a buy order function in the form of pc-y*(1+s) implied a translation.
Now that the fog has cleared, from the perspective of the Buy Order function the pc is not the set point, as I stated it previously because at the Zero Buy Point we get this:
{pc-y(1+s)}=0 and 0={pc-y")*F
simply gives two distinct y-values such that
y= pc/(1+s) Lichello
y"= pc
The implication of this have been discussed between Qarel and myself, but in actual application the Lichello pc will take on different values than the Vortex pc. It is not quite clear how this would affect overall performance, yet.
So, in regards to naming the pc we will end up asking if the "heat" on these semantics is worth the trouble:
For the Lichello AIM the Set Point is pc/(1+s) and for the Vortex AIM it is pc. From this it is clearly the choice of Lichello AIMers to call the pc the Portfolio Control.
I will leave it at that.
Conrad
PS:
See Message # 1351 from Qarel. That shows the translation of the Zero Point for the Lichello Aim quite clearly.
Hi Karel,
This is getting interesting...or maybe a vicious circle.
In Bulletin #1474 I responded to Mark. Mark stated profits result from riskwithin the context of his analysis.
It appears that several people on this Board subscribe to the Classical theory that profits result from risk. Now you tell me that this classical theory, which is the bone of my contention, is not well known. Maybe a different search technique might give more information on this.
In any case your observation may mean that the idea is so unacceptable that nobody dares to publish an article under that name. Maybe the idea that profits result from risk is simply an erroneous interpretation of the idea that profits result from risk avoidance!
Conrad
Karel,
Amen!
Regards,
Conrad
Mark,
And this is how I view risk. Based on the feisty responses flying back and forth, I think there might have been a misunderstanding on how the term "risk" was used.
Your assessment of how to deal with risk(and what risk is) is perfectly alright. But when you invest in a high risk stock category you will still seek out to minimize your exposure to risk by careful selection and timing so that, while the profits run, you can take advantage of that profit runand milk it to the extent you know how to do it.
This is quite different thing than the generalization that profits result form risk.
Conrad
Karel,
Why is the investment risk free?
The Cancer Story is only an example!! I defined it to be risk free. It is as simple as that. To take a situation to it limits demonstrates its effect. The important thing remains that in a high-risk stock category...the top of the Investment Pyramid that Tom Veale referred to, there are low risk ventures to be found. It's profitable to invest in low-risk profitable companies that perform well!
When Einstein explained that he placed himself, in a [thought experiment, on a light beam nobody dumped on him for telling an incredibly fabricated story. His illustration was effective.
The fact that in real life there are risks doesn't need explaining.
Conrad
Karel,
....Of course, a formal rebuttal of the risk vs. reward thesis would also be welcome
This might mean that in fact you also may not be happy with the idea that implies that profits result from risk. Why else would a formal rebuttal of the tenet be welcome?
It remains an undeniable fact that Risk Management precisely means to seek out risks and to eliminate or avoid them them.
Why is it that this essential is denied in holding on the the incorrect tenet? Risk management does not suggest: Seek out high-risk ventures to maximise profits.
Conrad
Hi Cowboy
Some time ago I did hear the name Toggle Point in a discussion but I am not sure exactly what was meant by it. It gives me the idea tat this might be the point at which a Buy Advice becomes a Buy Order. If that is what you mean then I gather that the Toggle Point is the share price at the end of the Hold Zone....in that case the toggle point is what I called the share price at which the Order is triggered = Trigger Point.
Assuming for the moment that this is what you mean:
PC/N= Share Price @ Hold Zone Limit
then you suggest that it might me more descriptive to call this share price the Set Point?
You might have a point here: The point that sets the Buy Order. I think of the set point as being the Reference for the process, and when the share price leaves the Hold Zone it toggles and causes a Buy Order to be generated.
AIM users have become accustomed to Portfolio Control for the set point and they have used the name "toggle" for something else. It's probably not important enough to change the name of the Toggle Point for the discussions on this Board but I would not object to it.
Regards,
Conrad
Tom,
The Pyramid you refer to is not the same thing. To have a mayor portion of an investment in a low-risk category(The Base)
is a sound strategy for the average investor, and certainly for inexperienced investors.
But even with this concept of the Pyramid it remains true that in the base investment there can be(and usually there are) some failures to be found. These failures were by definition sure losers because they did not survive. Also, some companies in the top of the pyramid can be, by virtue of their construction and the way in which they are managed, sure winners. Their classification does not make an investment in a sure winner a risky event.
Now the Risk Pyramid is something I ran into in Holland. The implication is that high profits can only be had from high risk(the top) and that low profits will be had by investing in low risk ventures(The Base).
So, "your" Pyramid refers to an investment distribution while "my" Pyramid refers to a Risk-Profit Relationship by which average people are advised to spend their money: "If you want to have a high ROI you have to run high risks.
That's a big difference between these pyramids.
Regards,
Conrad