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Doug,
Good introductory article. In view of your point about Intuitively, it just seems like there should have been more than two sell opportunities during that 5-year period from September 2002 to October 2007 one may have seen more opportunities with weekly checking, rather than monthly. Mark Hing's Automatic Investor program allows testing for things like this if you don't already have it.
Best,
AIMster
[OT]
Nice piece of work, Tom!!
With the top on I've been playing "Mobsters2" on Facebook and the style of that would fit right in, both for looks and getaway speed!!
Best,
AIMster
Hi, Cindy,
What you're seeing with the 3x fund is essentially leverage. And yes, it is a two sided sword. When it works with you, great, against you can cut pretty deeply!
Sometime back someone mentioned (might have been me) Praveen Puri's book on constant value investing. I've been using FAS/FAZ and keeping them balanced at around $1,000 per with $100 offset - when one drops below $900 I buy enough to bring it back up to $1000. Similarly on the upside, going the other way. So far there's only been one additional purchase of each.
Not a lot of money at risk and an interesting way to see how these perform.
Best,
AIMster
Thanks for your reply. The prospectus spells it out. The greater the volitility the greater the loss. Any advantage of AIM would probably be wiped out by the 50/100% process you describe. And, yes, it has been a wonderfully rewarding few months. Cindy
Putting on Devil's advocate hat here for a minute, if something has already fallen 80% since inception that means either there's only 20% until wipeout or at some point it will start to revert to the mean and go back up to some degree. So by starting now when most of the loss has already taken place, would certainly put you in a far better position than if you'd bought into it on day one.
I certainly wouldn't bet the farm on one of these, but it might make for a good LD-AIM candidate as it could take you out totally if goes up sufficiently. Something to consider, at least.
Best,
AIMster
Hi Aimster, Nirvanna
Did you get your mailing from Ed Downs last week? Were
you the other one on here that owned Omni Trader as I did?
I tried that one too a long time ago, and like you, I'm still on the mailing list. Most expensive software license I ever paid for. Don't even know now where the original CD is, probably in a box someplace and way out of date. I was annoyed that not only did you have to pay beaucoup bucks for his software, but even extra for a data feed, with some being cheaper than others.
I'll give Mr. Downs credit for an interesting theory of adaptive software but when I was getting a mix of both red and green arrows, what was I supposed to do? A pretty show of eye candy and not much else, at least for me. Others may have had different experiences, though I'd imagine most end up canning it after a while.
Didn't read the spiel, just gave it to the recycling bin at the post office. That's chutzpah if he's asking $5K now, when I signed on it was $495!!!
Give it to Mr. Lichello for advocating simplicity! It would be interesting to run a side-by-side comparison between AIM and OmniTrader. At the end of a couple of years who would be the winner? Certainly the investor's pocket would be a winner getting all the price information for AIM for free off the web, rather than paying for a data feed, if not a software "maintenance fee" as well, never mind the upfront cost of the software in the first place! Even the software solutions for AIM are cheap in comparison!
Best,
AIMster
Aimster....Re: PayTrading
I was reading some older conversations this morning about your experiment with the PayTrading strategy, and was wondering if you had continued with the experiment. If so, what have been your results? What are your thoughts in general about using such a strategy? What are its pitfalls?
Thanks for the follow-up. I haven't been following it as closely as I was due to a lot of things going on at work that have left little time for such experimentation.
Some observations, however, in no particular order:
The original pay trading has one moving from one stock to stock. My experiment altered this fundamental by limiting itself to the 3x ETF's.
Whilst the volatility lends itself to quite often a quick 1%+ gain, the inherent weaknesses are manifest in two ways:
1) the etf's, whilst purportedly inverses of each other do not move with the symmetry that one would expect of supposedly inversely correlated items. It is for this reason that these have come under more scrutiny with some brokers dropping them altogether. If BOTH the bull and bear flavors have declined in value, what's wrong with this picture?
2) using pay trading in this fashion at least does force one to become more of a trend follower, taking incremental gains as the trade moves up. But barring more major market upheaval there will be finite limits that these holdings, even with their 3x amplification will eventually run into. At that point they will no longer be suitable for the pay trading system and could go through long periods of reversion to the mean, doing nothing productive for you just by sitting there.
3) given the limitations of the above, one may be better served by AIM or some form of constant value / constant ratio system, or even a very simple invest, take gain at fixed %, sell whole thing and repeat. That way you're limiting the risk to whatever amount you find tolerable. A variant on this might be to place an alert on Yahoo or similar so that after you take the gain, you'll be alerted to whenever the price drops enough back to a level you find comfortable, rather than reinvesting immediately.
So in a short term sense pay trading may be viable, but I don't think it's a long term solution, at least not with a constant cyclic investing in these particular instruments.
Of course, one may use AIM in several varieties on these:
AIM each individually
AIM all the bulls and bears separately but together in a single portfolio
AIM all 20 of them in a single portfolio.
What one can do with unlimited time and money!
Best,
AIMster
Typo error 2,,,,,
Trading on a cell phone can be dangerous I guess.
My entire positions got sold out. Don't remember hitting that button?????
Maybe that's why many use GTC's and just let the market come to them instead of waiting to pull the trigger.
Ouch!
Better luck next time!
Best,
AIMster
The general principle of AIM works well. That being said, some things will work with it better than others. The trap to avoid falling into in a back-testing mode is to start to curve fit the parameters to give you the best result. Because they really aren't. The back testing will use the end of day closing prices as historically recorded, not the actual fill price you would have gotten during the trading day.
Besides, as Toofuzzy pointed out, that was then, this is now. A problem with software like VectorVest that also allows back testing - for all the coulda, woulda, shouldas, you wind up with what you've got.
A cautionary reminder where if you suddenly see something like, oh crap, if I'd ONLY... the crystal ball always looks backward, and sometimes even that isn't 20/20!
Best,
AIMster
Back testing AIM.
Has anyone done this or is there a program for this?
Automatic Investor offers this feature and others may also.
Best,
AIMster
Does anybody know of a site where, if you put in a list of stocks or funds it would suggest non-correlated additions? Given the overwhelming correlation from last Fall through March of this year, I have to believe there's more than the one (TLT) that Clive found.
Thanks!
AIMster
AIM'ing perhaps VTI, TTL and IAU
Correction : That should have read TLT not TTL
I noticed. <grin>.
Seriously, though... The PP does offer the utmost in simplicity. And if that's what you're after, it seems to me a good way to go.
However! (and you knew there had to be one to provoke a new message, right)? The PP does fall short in terms of respect involving whole swaths of asset classes. It might have been best when the US economy was one of the primary dominant markets and owning a broad-spectrum representation made the most sense.
Keeping the original three as you have, I've added five more for a total of eight holdings (nine if you count cash separately).
These are:
RMT - Royce Microcap Trust - invests in the small end of the market so it would complement VTI to give a very thorough US market representation.
What's missing are any representations of foreign markets, which are now major players:
EFA - MSCI Europe, Far East & Australia - mainly largecaps of developed economies.
EMF - Templeton Emerging Markets Fund
Given the decline of late, the following is a fairly safe and broad way to get into the US real estate market:
IYR - iShares Dow Jones Real Estate Index fund
Finally, to round it out for more income and a good performance return, at least lately:
PHK - PIMCO High Income Fund
To see how this selection measures up, check out
http://stockcharts.com/charts/performance/perf.html?VTI,IAU,TLT,RMT,EFA,EMF,IYR,PHK
This would give a more well-rounded portfolio, even if there is a bit more work to it.
PP is mundane - modest gains/low risk that's well suited across all economic conditions. AIM adds a bit of spice to the rebalancing. For greater 'get-richer' opportunities deploy the 40% cash reserve into low down risk/high up reward type ventures (Dragons Den style (do you get such a program in the US? I think you do)).
Hi, Clive,
Just looked up Dragon's Den and it is carried over here on BBC America, available as one of the more extended channels on satellite or possibly cable systems. I've been watching Dr. Who on BBC-Am, though I must still confess a bias for Tom Baker's version. The new format is far less "soap opera" in pace than the original, though. Also the F/X are much more outstanding on the new show, but watching the old via streaming Netflix does bring with it a charm that the new show can't due to time constraints.
As for a fund that might give you some sort of play into that type of thing is Equus Total Return, EQS, trading at an almost 60% discount to the NAV and throwing off a 3.76% yield. The spiel: "The Fund is a business development company that invests in equity and equity oriented securities issued by privately owned companies in transactions negotiated directly with such companies. The Fund investment in portfolio companies consist principally of equity securities, such as common and preferred stock, but also include other equity oriented securities, such as debt convertible into common or preferred stock or debt combined with warrants, options or other rights to acquire common or preferred stock." Their high management fee of 4.29% is a turn-off, though, but it is interesting to me to see a fund occupy this particular niche space.
Best,
AIMster
I have been paying attention to different points of view regarding what we might expect going forward. Mr. Schiff, who correctly predicted the crash in equity markets in 2008, is calling for hyperinflation. To my mind, it doesn't seem right.
If inflation is a product of the overproduction of currency relative to it's perceived value, we're due for hyperinflation given the ocean of red ink from deficit spending devaluing each dollar. I mention "perceived value" because the dollar is a fiat currency, not backed by anything other than the promise of the hot-air politicians in Washington and the whim of the privately held Federal Reserve Bank.
A trigger point might be for some major player such as China, for example to a) stop buying our treasury debt and b) demand that tangible goods such as oil or other mineral resources be denominated in a currency other than the Dollar. Euros might be a logical choice, and I've heard rumor of wanting to create some sort of referential trans-national currency, call it the "Global" for lack of a better term. How this would work rather than the present system remains to be seen, but there are people calling for alternatives. Which may not bode well for the US economy in the long run, given the historical post-WW II dominance of the dollar.
So I would give some creedence to such scenarios, and hope they don't come to pass.
Best,
AIMster
Re: CMGTX
Interesting article on absolute funds and their performance (or not):
http://finance.yahoo.com/news/Whats-So-Absolute-about-ms-3234263895.html?x=0&.v=1
Best,
AIMster
Hi, LC,
Good to see you posting again!
The concern over leveraged funds is not unwarranted, for the average, buy-and-hold type investor. For those of us using a system like AIM, however, the results may be far more useful, as we're employing a tool designed to capture volatility. The more volatile, the better it works.
That being said, another test might be to buy and sell the matching pairs each day, as they're designed to mirror the daily, rather than longer-term performance. If the daily gain exceeds the daily loss from the mirror image, the system might work.
I think I'd still trust AIM to it first, though. Fewer transactions and associated costs.
Best,
AIMster
Many of the currency ETFs pay a reasonable yield (not the Japan one, however) so one's money at least earns something while sitting around in either currency.
Another way to "do" currencies and get some measure of domestic bank protection is through the St. Louis based Everbank. They offer CD's and so on in various currencies. See http://www.everbank.com for more info.
Best,
AIMster
Aim has been around for 30 plus years. Has any one written a basic language program for it. I did in gwbasic but it was very primitive. Is there any downloadable versions of aim investing in the basic language. Aim came into existence around the time home computers all ran dialects of basic.
Well! Another old-timer like myself in terms of PC programming. I still make use of Microsoft Professional BASIC 7, so ancient now I've the option of creating an executable for the command line version of OS/2!! This, of course was replaced by Visual BASIC, something I never got around to. There may be some other versions of BASIC out there still (some possibly freeware), but I don't know of any source code for AIM. Even if there were you might have 'dialect' issues to contend with.
If you're looking for a pretty robust and up-to-date program to handle AIM, Mark Hing's Automatic Investor program does a very good job and is easy to figure out and use, especially since you have a programming bent already. Of course since it's his baby you can't really tweak it beyond more than using it.
Many people use a spreadsheet and if cost is a concern, Sun Computing offers Open Office, a freeware office suite of programs including spreadsheet, word processing and more.
And some, like our fellow poster Toofuzzy do it the truly old fashioned, but still perfectly valid way of columned paper & a #2 pencil.
Whatever works best for you.
Best,
AIMster
Toofuzzy, if you are a gardener you can make a bundle here in Holland growing wiet. . . NO!!NO. . Not weed!
I do not have a garden, so I wouldn't know what Ruth Stout is saying. . .does it help anyone? . .
Hmmm! Now there's an idea for you, Conrad, one with great historical precedent and would get you down and back to Earth at the same time. Tulip bulbs. You could make a fortune! Well, until at least the new bubble burst. Just as they used an old scam in the movie, "The Sting," I wonder if you could start a new round of speculative tulip mania. Just barricade the door when the thing collapses! <grin>!!!
One closed end fund that gives a nice chart, is trading at a 38.27% discount, gives a 9.45% yield specializing in energy companies is TTO:
The management fees are higher than I'd like at 2.41% but this shows the type of stock or fund to look for with AIM!
Part of a larger comment I posted on an NY Times article this morning which might be of some interest here:
And as for your comment on the "Federal Reserve," they're right, you know. It's neither "federal," nor a reserve, but a privately held bank printing fiat currency that has the intrinsic value of a bedbug, bleeding our national wealth faster and faster the more currency they print.
Now you know, in case you had any belief in the Volckers, Greenspans or Bernankes of the world.
My first action with my AIM-method was the FOREX business. I considered the Dollar an excellent equity:
I made money when the value dropped on the average
I made money when the price rose on the average
Hi, Conrad,
I haven't experimented with currency plays but they certainly seem to be advertising them all over the 'net these days. So in general, applying AIM to FOREX would be, for example say you've got a Euro/Dollar pairing; would you shift from one to the other, rebalancing every so often internally or would you add external funds into the losing side, keeping a constant ratio between the pairs?
Pardon my ignorance if what I've said makes no sense at all. I suppose I need a "FOREX for Dummies" book or website. And more time to study and get the hang of it. Much less figure out how such dealings would have to be reported on one's taxes!
Best,
AIMster
Is possible to get an injection with the genes from an Super Marketeer? If yes, then I will invest my € 5000 savings I have in that little known secret.
Do not tell anyone, after you have told me, of course.
Naturally. I suppose the best candidate would be Bill Gates. The richest guy on the planet and he made billions on selling mediocrity to millions. Not that your software is mediocre, but you get the point, right? <grin>
Best,
AIMster
And then add to PORTFOLIO CONTROL 10 percent of the amount you have just invested in stock." I forgot to do the and then add 10 percent part. Some recalculating seems in order.
If you want to spare yourself the recalculations, the additional 10% is not required in the future editions, just add 100% of the invested amount to Portfolio Control.
Best,
AIMster
What I was considering was adding to the Program at the low in March, but was nervous about the comments about overwhelming the system... It makes sense to me to add cash if I've run out after an extended low, like in March, but am wondering what specifically about the formulas get overwhelmed. I'm thinking a missed a good opportunity to get ahead at that previous eceptional buying oppty we had earlier...
What changes is the cash/equity ratio as well as the hold zone derived on the then current value of Portfolio Control versus the "new" value once the new investment is factored in. I'm not saying it's a bad thing, it is an adjustment which AIM will account for over time.
As for the lost opportunity, yes, hindsight is always 20/20. But at the time, as the valuation was cratering right and left, the new Obama administration just getting their footing, caution did seem to be prudent to some degree. Granted AIM's a contrarian enough beast but when it feels like a limbo dance out there (how low can we go) then even any of us with strong measure of intestinal fortitude are put to the test. We're more daring than most, but we also want to have more cash reserve for later on! Just in case.
Best,
AIMster
I know Lichello advises against doing this often ..
I didn't remember this advice. Can you point me to a chapter in the book or some other source? I scanned my book (1977 paperback version) last night but couldn't find the reference. I'm interested in what and how he said it.
I'd have to go through my 4th edition version again (Dec 2001 according to Amazon.com), (if you've the 1977 that may be the first). I believe it's in one of the Q&A segments. I don't know the page right off, but I can explain the theory:
AIM is designed to be a closed-loop, self-regulating system. As such, once you set it upon it's course, it measures the price of the stock(s) in question and adjusts the ratio of cash to stock accordingly. Further, it wants to do so based upon it's own interpretation of comparative analysis. Suddenly dumping in more cash changes the ratio and skews the history built upon thus far. This is why Lichello somewhat grudgingly allows for infrequent cash infusions (I recall one example was a Christmas bonus). As part of investing this new cash, one is instructed to split it between the equity and stock side, incrementing Portfolic Control the full 100% of the stock purchase value, rather than the usual 50%.
Which is what makes AIM difficult to use for people in the working world who are still able to save money regularly. Infusing cash all the time would make using AIM not so effective. Hence, Synchro or Twinvest.
Best,
AIMster
If I run out of cash while AIM signals buy, is it prudent to add cash and keep 'buying low'? I know Lichello advises against doing this often, but it seems like the right thing to do.
I see where Toofuzzy's already given some advice and I concur with his recommendations generally. A couple of points: In designing AIM, Mr. Lichello was a romantic, firmly believing in the KISS principle (Keep It Simple, Stupid). The constant temptation is that we tend to resist simplicity, preferring instead to tinker and tweak. If Mr. Lichello gave us this good foundation to work with, surely we can do better than his original formula. And maybe we can, some of the time. Even he admits to not making a million in real life, and was amenable to adapt the AIM algorithm for the Bull market of the '90's with AIM-HI.
So, to your original question about adding more cash - a definite maybe. Depends, as TF mentioned if it's a single stock or fund. How much more "down" do you think it will go from here to justify new cash? Is this cash freely available to invest, or will Peter want to hurt you later as you've given the cash reserve that was his money to Paul? Nevermind Mary. If you think the stock has potential to be soon headed for an updraft, leaving on a jet plane, it might be worth doing. On the other hand if it's going to go "poof" from a puff, the magic dragon of the stock market, it might be best to hold off. I know, a folksy answer, but money in the bank is music to the ears!
Best,
AIMster
Of AIM and Pay trading:
Been doing just general musing on both. Random thoughts for general consumption and grey-matter neuron stimulation.
Both systems have the same goal of taking a small seed money and growing it into $1,000,000.
AIM uses a contrarian approach, PT is more trend-following.
I suppose one could develop a mirror-image of PT to use shorting and work it from that side as well, i.e., sell a stock that's been downgraded and buy it back cheaper. That would give you the option of playing both sides.
In the original mode of PT one moves like a bee from stock to stock, capturing incremental gains with each move, growing the size for the next investment, yet always remaining invested. AIM shuttles between cash and stock with exposure to the market dictated to a degree by overall market sentiment. Less in when everyone's giddy, more in when everyone's singing the blues. AIM's investment size grows as a function of Portfolio Control.
I've modified the AIM test as I mentioned to TooFuzzy to do so on each individually, rather than as a whole - this makes it more of an apples-to-apples as I'm using PT on each individually.
More to follow. Of course adding in 3x funds changes things for both systems - but at least I'm having fun experimenting, even if the results will be coulda woulda shoulda, at least it won't break the bank either if they tank!
I guess what I was asking was...... Why would you sell and buy back the same shares in real life and (2) How could your gain be any greater than just holding the shares unless you had a drop in the share price that you took advantage of someplace in the middle. Anyway the whole process looks too complicated for me anyway.
Hi, Toof,
Your last point may be the most salient. In real life the Pay Trading system will likely have more transactions than AIM, even though both could be run simply with GTC limit orders.
To restate: the goal of pay trading is accumulation over many repetitive cycles of increasing the size each time through. Thus: if you invest $2000 and sell at a 10% gain you've got (not counting commissions) $2200. Keep repeating the process each time and over 19 additional cycles we get this:
$2,000.00 $200.00
$2,200.00 $220.00
$2,420.00 $242.00
$2,662.00 $266.20
$2,928.20 $292.82
$3,221.02 $322.10
$3,543.12 $354.31
$3,897.43 $389.74
$4,287.18 $428.72
$4,715.90 $471.59
$5,187.48 $518.75
$5,706.23 $570.62
$6,276.86 $627.69
$6,904.54 $690.45
$7,595.00 $759.50
$8,354.50 $835.45
$9,189.95 $918.99
$10,108.94 $1,010.89
$11,119.83 $1,111.98
$12,231.82 $1,223.18
$2,000.00 4.00% $80.00
$2,080.00 9.00% $187.20
$2,267.20 2.00% $45.34
$2,312.54 3.00% $69.38
$2,381.92 9.00% $214.37
$2,596.29 5.00% $129.81
$2,726.11 5.00% $136.31
$2,862.41 9.00% $257.62
$3,120.03 4.00% $124.80
$3,244.83 9.00% $292.03
$3,536.87 3.00% $106.11
$3,642.97 9.00% $327.87
$3,970.84 4.00% $158.83
$4,129.67 7.00% $289.08
$4,418.75 1.00% $44.19
$4,462.94 9.00% $401.66
$4,864.60 10.00% $486.46
$5,351.06 7.00% $374.57
$5,725.64 9.00% $515.31
$6,240.94 4.00% $249.64
Um not really.
Hi, Toof,
A "Watch folio" works like a regular account, for testing investing ideas in. Since it's virtually funded, rather than funded with real dollars, gains or losses are similarly virtual and have no performance actuality. Thus you can trade from $1 to $ 1,000,000 if you want to. So trades can be made by dollars or shares or combination. So, yes, actual trades are placed:
08/04/2009 Buy 45.41627 shares at $64.79 per share. $2,942.52 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/04/2009 Sell 45.38126 shares at $64.84 per share. $2,942.52 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 22.18675 shares at $118.98 per share. $2,639.78 Misc. Info
TYH DIREXION SHS ETF TR TECH BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 25.21526 shares at $115.35 per share. $2,908.58 Misc. Info
EDC DIREXION SHS ETF TR EMERG MKT BULL Watch Account: Bull/Bear ETFs
08/03/2009 Buy 25.22162 shares at $119.17 per share. $3,005.66 Misc. Info
EDC DIREXION SHS ETF TR EMERG MKT BULL Watch Account: Bull/Bear ETFs
08/03/2009 Buy 35.10677 shares at $77.36 per share. $2,715.86 Misc. Info
MWJ DIREXION SHS ETF TR MID CAP ETF 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 38.54566 shares at $70.85 per share. $2,730.96 Misc. Info
DZK DIREXION SHS ETF TR DEV MKT BULL3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 38.72978 shares at $72.83 per share. $2,820.69 Misc. Info
DZK DIREXION SHS ETF TR DEV MKT BULL3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 45.32232 shares at $60.22 per share. $2,729.31 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 45.38126 shares at $61.48 per share. $2,790.04 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 59.98234 shares at $43.61 per share. $2,615.83 Misc. Info
BGU DIREXION SHS ETF TR LARGE CAP BULL Watch Account: Bull/Bear ETFs
08/03/2009 Buy 66.90841 shares at $36.03 per share. $2,410.71 Misc. Info
ERX DIREXION SHS ETF TR ENERGY BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Buy 72.65311 shares at $37.62 per share. $2,733.21 Misc. Info
TNA DIREXION SHS ETF TR SM CAP BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 22.13834 shares at $119.24 per share. $2,639.78 Misc. Info
TYH DIREXION SHS ETF TR TECH BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 25.20429 shares at $115.4001 per share. $2,908.58 Misc. Info
EDC DIREXION SHS ETF TR EMERG MKT BULL Watch Account: Bull/Bear ETFs
08/03/2009 Sell 25.21526 shares at $119.20 per share. $3,005.66 Misc. Info
EDC DIREXION SHS ETF TR EMERG MKT BULL Watch Account: Bull/Bear ETFs
08/03/2009 Sell 35.17501 shares at $77.21 per share. $2,715.86 Misc. Info
MWJ DIREXION SHS ETF TR MID CAP ETF 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 38.52390 shares at $70.89 per share. $2,730.96 Misc. Info
DZK DIREXION SHS ETF TR DEV MKT BULL3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 38.54566 shares at $73.178 per share. $2,820.69 Misc. Info
DZK DIREXION SHS ETF TR DEV MKT BULL3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 45.32232 shares at $61.56 per share. $2,790.04 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 45.46573 shares at $60.03 per share. $2,729.31 Misc. Info
FAS DIREXION SHS ETF TR FINL BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 59.87258 shares at $43.69 per share. $2,615.83 Misc. Info
BGU DIREXION SHS ETF TR LARGE CAP BULL Watch Account: Bull/Bear ETFs
08/03/2009 Sell 67.03852 shares at $35.96 per share. $2,410.71 Misc. Info
ERX DIREXION SHS ETF TR ENERGY BULL 3X Watch Account: Bull/Bear ETFs
08/03/2009 Sell 72.76967 shares at $37.5597 per share. $2,733.21 Misc. Info
TNA DIREXION SHS ETF TR SM CAP BULL 3X Watch Account: Bull/Bear ETFs
Well, the best performer of the lot, EDC continues to roll along, having passed a 50% return since 25 June trade today.
EDC 06/25/2009 06/26/2009 $2,000.00 $2,061.31 $61.31 3.07%
EDC 06/26/2009 07/01/2009 $2,061.31 $2,150.45 $89.14 4.32%
EDC 07/01/2009 07/16/2009 $2,150.45 $2,209.69 $59.24 2.75%
EDC 07/16/2009 07/17/2009 $2,209.69 $2,275.59 $65.90 2.98%
EDC 07/17/2009 07/20/2009 $2,275.59 $2,481.77 $206.18 9.06%
EDC 07/20/2009 07/20/2009 $2,481.77 $2,542.68 $60.91 2.45%
EDC 07/20/2009 07/23/2009 $2,542.68 $2,675.51 $132.83 5.22%
EDC 07/23/2009 07/23/2009 $2,675.51 $2,712.39 $36.88 1.38%
EDC 07/23/2009 07/31/2009 $2,712.39 $2,751.30 $38.91 1.43%
EDC 07/31/2009 08/03/2009 $2,751.30 $2,908.58 $157.28 5.72%
EDC 08/03/2009 08/03/2009 $2,908.58 $3,005.66 $97.08 3.34%
Is anyone using the 3xETFs with the AIM system?
If so, how are your real results.
If not, are there issues?
I'm not doing so just yet, but I have started to do backtesting with Automatic Investor's historical testing function. Results are mixed with some producing substantial gains and some having started with a good bit of volatility, only to have crashed and remain sitting there with all the cash reserve accumulated thusfar expended. As to how long they'll remain like that, who knows but if one were to AIM these individually, such would be the results. On the other hand, if you were to AIM all 20 of them as a single portfolio with 50% cash reserve to start, selling from the gainers, buying into the declines, the cumulative effect might be interesting, if the bull/bear tension between the various funds wouldn't cancel out too much of the portfolio momentum.
Too many funds, too little time and money!
Best,
AIMster
Are you actually doing this buying and selling or just doing it on paper by updating your current buy price from $2000 to $2200?
Hi, Toof,
I'm using what foliofn calls a "watch folio" which behaves like a real account, only reminding you when you "push the button" that these aren't real dollars as it's not a funded folio. So it's closer to real life than purely paper trading.
As for the $2000/$2200, I find 10% is a number people can easily grasp so the references to those figures were for illustrative purposes to show how the money grows in such a system.
Hope this shines a light on your question.
Best,
AIMster
The PayTrading strategy is to never take a loss. Regarding your implementation of the strategy, is it your inclination to hold on to a position or positions if the prices move against you and the 1% sell isn't hit for some time? I'm talking worst case. Presumably last winter your shorts would have done well but might the longs have gotten away? You're using ETF's; would your answer be the same for stocks? Perhaps the innate volatility of a 3X would trigger the sell before it got away?
Yes, my intent in this exercise, at least is to remain long all the time, taking repetitive profits as they come along. At least in this case it's not real money so I'm not actually having anything at risk, per se, but this would be how I'd play the game in real life. The small detail not yet having an extra $40,000 to use for "seed money."
In the worst case, yes, you'd be sitting on paper losses, but in theory the mirror image funds should be making money and growing for you. Truly the worst case with these particular set of funds would be for them both to revert closer to the mean of zero, then move in a sideways fashion but in a non-trending way. A couple of them do pay a small dividend which would at least offer some time compensation, especially as the holdings grow to larger values.
If I were doing this with stocks I might favor larger, dividend paying bluechips to at least offer some compensation if the holding time becomes long.
The bottom line is that any and all systems, methodologies, what have yous are always going to present a mixture of risk and reward. Finding our place on that "efficient frontier" where we get the most return for the level of risk we're comfortable with is, in a sense, our own personal Holy Grail quest. That's why such a journey is unique to us all individually, why there's never going to be a one-size-fits-all system that will work for all of the people, all of the time. AIM comes close for many, but won't save you if you keep feeding more and more money into an Enron. Pay trading may also work well for others, either in the form I'm experimenting with or in the pure stock form as originally developed for. And lord knows there are as many ideas and systems as there are investors to think of them, write a book or put up a website. If it sounds too good to be true it probably is, but if it lets you kick the tires and try it out, judging for yourself, then such a system merits consideration, if not implementation.
Best,
AIMster
If on Monday the fund goes up 10% to 2200, you're starting Tuesday with $2200, just as if you sold the $2200 Monday night and invested it all on Tuesday? What am I missing??
Basically what we're doing here is realizing the gain almost as fast as it happens and using it to "build the larger base of the pyramid" as Lichello mentioned in the AIM book. The buy-and-holder might see a gain, yes, but without realizing it for reinvestment, the fund could turn on him in a moment (especially with something as volatile as a 3x fund) and therefore his paper gain would evaporate before it could be used effectively. Look at the summary of trades below. Note how the first gain of $61.31 required a 3.07% increase to realize. Yet by the fifth trade later it was a little over 2.45% to gain the same dollar amount. By the end of the trades shown, our value has gained 35.61%
EDC 06/25/2009 06/26/2009 $2,000.00 $2,061.31 $61.31 3.07%
EDC 06/26/2009 07/01/2009 $2,061.31 $2,150.45 $89.14 4.32%
EDC 07/01/2009 07/16/2009 $2,150.45 $2,209.69 $59.24 2.75%
EDC 07/16/2009 07/17/2009 $2,209.69 $2,275.59 $65.90 2.98%
EDC 07/17/2009 07/20/2009 $2,275.59 $2,481.77 $206.18 9.06%
EDC 07/20/2009 07/20/2009 $2,481.77 $2,542.68 $60.91 2.45%
EDC 07/20/2009 07/23/2009 $2,542.68 $2,675.51 $132.83 5.22%
EDC 07/23/2009 07/23/2009 $2,675.51 $2,712.39 $36.88 1.38%
This is where the paytrading idea comes in. With paytrading you execute a strategy, when a gain is reached you close the position and start the stategy again in new trading cycle. Paytrading hopes to have a new trading cycle every couple days. Seems you could follow the same theory but have the trading cycles be in months.
The best of both worlds and worth 1/2 a grub! (for those new to the board see around every 1000th message to see how the game goes).
Anyway I think this idea might have some potential. I'm up over 20% now overall since 25 June. I was going to start factoring in AIM applications but the power kept going off! One of those days - a truck hauling a load of pickled pigs' feet overturned or something like that - the revenge of the swine!
More to follow!
Best,
AIMster
That seems a marked contrast to AIM. Just hold on and hope if your stock goes down. I have trouble reconciling the short term elements like analyze and trade today's upgrades at 10:00 AM with the the never take a loss piece. What if you bought some stock last fall that's not back to your price target? At least AIM adds shares as the price falls. I believe in AIM and trade QLD, the 2x leveraged NASDAQ 100 ETF. If you believe in the stock even though its down then take the opportunity to buy (AIM for example). If you don't believe and wouldn't buy more then get out or use a stop loss to force the issue. When do investors become long-term investors? When their stock goes against them. Sorry.
Both AIM and Pay Trading are dependent on the stock moving. PT looking for a short series of repetitive gains, AIM going the longer if slower route. Both systems will fail if the stock tanks (think Enron). AIM has increasing risk if you keep buying more and more at lower and lower prices. With PT it's more like an option in the sense that your risk is limited to the one initial investment. Of course, if you're to the point where you're putting $100k on a single stock, you'd best have a good deal of faith in that stock!
The stock risk is somewhat mitigated when using ETFs or CEF's instead as baskets are less vulnerable than a single stock. Certainly in my current test of 20 of the 3x holdings has each one growing individually, so I'm not betting the farm on any single holding.
Best,
AIMster
For all the pay-trading details, a link to the original e-book:
http://www.paytrading.com/paytrading/ebook.htm
Interesting concept anyway.
Now back to our originally scheduled AIM discussions, although the board's been so quiet lately, I figured a side trip might add something to stimulate the various sets of neurons!
Sell when I get >= 1.5% gain, buy soon thereafter with original amount + gain. Remember that the original pay trading model called for a 1% gain. That was several years ago and one might want to use a higher minimum now. If I were using real money with commissions being applied I'd no doubt go with something higher to offset the commission plus allow for slippage and still make a profit. Probably closer to 4 or 5% as a minimum. But since this test is what it is, I can ride as low as what seems reasonable.
Best,
AIMster
P.S. I suppose I could set up another watch folio with the same parameters and use AIM. Not exactly apples-to-apples given different start dates, but could prove interesting going forward.
Hi Aimster! I'm still confused about your buy and sell decisions with the Leveraged ETF/Paytrade scenarios. Are you 'in' all 20 each day, or are you picking and choosing which to be 'in' based upon some signal (such as Paytrade's upgrade signal?)
Yes, I'm in all 20. My logic is the paytrade principles:
1) take a frequent, if small gain. Reinvest.
2) Don't lose money.
For #1 under the paytrade system you'd roll the money over from one stock into another, based on the upgrade recommendation. Since we're constrained to the 20 3x ETF funds, we have to reinvest in the smaller pool that we've got. Now, as to why to trade versus simple B&H, simple, the larger our initial investment, the larger the dollar amount for the next same percentage increase. 10% on $2000 gives $200. Investing $2200 the next time gives a $220 gain at the same 10% rate. Keep that up and that's how the money grows.
As to #2, since these are bull-and-bear pairs, there are times when one will be advancing, the others declining. My risk is not more than the amount initially invested.
I've also started testing these on AI and some look very promising, others, well, probably need more cash than the initial 50% I was using.
Best,
AIMster
Finally got done with the big royalty project at work so took a little time at running the 3x funds through AI's back tester. Some results seem quite promising.
For these in particular (and maybe as a general principle to extend cash reserve when in a protracted bear market) I hit upon something interesting. Our default model has been to follow Lichello's recommended parameters of 10% buy and sell SAFE values, with a 5% minimum transaction size. I got a more efficient cash reserve performance when I inverted the sell side. So, for Buy, 10% SAFE, 5 % Min Trans, but for sell 5% SAFE and 10% min trans. the same overall levels, but this returns more cash for later consumption.
More to follow.
Best,
AIMster