Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Take profit, buy in again investing original amount plus profit Isn't that the same as just leaving the investment there ...except you add Commissions ???
The issue with the 3x funds is that the increased volatility means that their trends are far less certain and can reverse quickly. So one must be more cat-like and pounce on the profit when it becomes available. Hence some of the regulatory concern for people who are unwilling to do so and think one can use these other than on a daily basis as one would a regular ETF.
i.e. Why sell then buy with the same money ??
Why not use AIM and just Bank a portion of the Profits?
That is another option, certainly. One could also just use the same initial amount over and over again also, taking whatever profit and investing it in other things. That would be one way of reducing the risk of these.
The point of this particular exercise is also in part to see if using such volatile items will supercharge the "pay trading" system as well, using a mathematical certainty of going from $2000 to $1,000,000 as previously posted. The same goal as AIM, albeit with a more trade-intensive model and suitable for retirement accounts.
As I mentioned in the post to Cindy, Real Soon Now I hope to test the first month's results through Automatic Investor.
Best,
AIMster
This may speak somewhat to the concern that the longer term use of these funds may become costly......
And here I figure out a method that so far actually works and the markets must have realized I'm on to something and they go and pull the plug!
NARF!!! <grin>
Best,
AIMster
Hi, Bosco,
List can be found here: http://www.direxionshares.com/etfs
As for buying or selling. I sort of use the shampoo instructions, "lather, rinse, repeat" only buy in, take profit, buy in again investing original amount plus profit. See the more detailed response to Cindy. If it goes down it just sits there until the process above.
Best,
AIMster
AIMSTER, How do you expect time to affect the relationship of bull to bear funds?
Hi, Cindy,
If I knew the answer to that I'd start my own truly accurate newsletter and make millions! (grin)!!
Seriously, though, I really don't know. What I can tell you is that my test experiment at the end of the first month doing simulated trades returned $6815.30 or 17.04%, this on an initial presumed $40,000 investment, starting each of the 20 3x ETF funds at $2,000 each. Note that these funds are held in a "watch folio" at Foliofn and are not real market trades. Therefore neither slippage nor commissions are factored in which would likely change the results somewhat in actual trading. But this should be a fairly close approximation.
Of the 20, 18 had trades in the first month, and the other two traded today, the first trading day of the new month, so all 20 are now in play. List of the first month trades follows:
Fund P Date S Date Bought Sold Gain % Gain
BGU 06/25/2009 07/01/2009 $2,000.00 $2,080.70 $80.70 4.03%
BGU 07/01/2009 07/16/2009 $2,080.70 $2,127.80 $47.10 2.26%
BGU 07/16/2009 07/20/2009 $2,127.80 $2,182.24 $54.44 2.56%
BGU 07/20/2009 07/21/2009 $2,182.24 $2,243.91 $61.67 2.83%
BGU 07/21/2009 07/22/2009 $2,243.91 $2,290.77 $46.86 2.09%
BGU 07/21/2009 07/23/2009 $2,243.91 $2,366.04 $122.13 5.44%
BGU 07/23/2009 07/24/2009 $2,366.04 $2,407.21 $41.17 1.74%
BGZ 06/25/2009 07/02/2009 $2,000.00 $2,096.10 $96.10 4.80%
BGZ 07/02/2009 07/06/2009 $2,096.10 $2,177.99 $81.89 3.91%
BGZ 07/06/2009 07/07/2009 $2,177.99 $2,220.07 $42.08 1.93%
BGZ 07/07/2009 07/08/2009 $2,220.07 $2,270.63 $50.56 2.28%
DPK 06/25/2009 06/30/2009 $2,000.00 $2,050.86 $50.86 2.54%
DPK 06/30/2009 07/06/2009 $2,050.86 $2,161.56 $110.70 5.40%
DPK 07/06/2009 07/07/2009 $2,161.56 $2,199.90 $38.34 1.77%
DPK 07/07/2009 07/08/2009 $2,199.90 $2,278.81 $78.91 3.59%
DZK 06/25/2009 07/01/2009 $2,000.00 $2,071.92 $71.92 3.60%
DZK 07/01/2009 07/16/2009 $2,071.92 $2,100.13 $28.21 1.36%
DZK 07/16/2009 07/20/2009 $2,100.13 $2,192.24 $92.11 4.39%
DZK 07/20/2009 07/21/2009 $2,192.24 $2,250.09 $57.85 2.64%
DZK 07/21/2009 07/23/2009 $2,250.09 $2,363.69 $113.60 5.05%
DZK 07/23/2009 07/24/2009 $2,363.69 $2,399.91 $36.22 1.53%
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%
EDZ 06/25/2009 07/06/2009 $2,000.00 $2,117.70 $117.70 5.88%
EDZ 07/06/2009 07/08/2009 $2,117.70 $2,226.25 $108.55 5.13%
EDZ 07/08/2009 07/08/2009 $2,226.25 $2,260.73 $34.48 1.55%
ERX 06/25/2009 07/01/2009 $2,000.00 $2,084.54 $84.54 4.23%
ERX 07/01/2009 07/21/2009 $2,084.54 $2,128.57 $44.03 2.11%
ERX 07/21/2009 07/23/2009 $2,128.57 $2,214.74 $86.17 4.05%
ERX 07/23/2009 07/24/2009 $2,214.74 $2,283.28 $68.54 3.09%
ERX 07/24/2009 07/24/2009 $2,283.28 $2,314.84 $31.56 1.38%
ERY 06/25/2009 06/26/2009 $2,000.00 $2,066.61 $66.61 3.33%
ERY 06/26/2009 07/02/2009 $2,066.61 $2,192.77 $126.16 6.10%
ERY 07/02/2009 07/06/2009 $2,192.77 $2,395.60 $202.83 9.25%
ERY 07/06/2009 07/07/2009 $2,395.60 $2,435.28 $39.68 1.66%
ERY 07/07/2009 07/08/2009 $2,435.28 $2,508.59 $73.31 3.01%
FAS 06/25/2009 06/29/2009 $2,000.00 $2,101.88 $101.88 5.09%
FAS 06/29/2009 07/15/2009 $2,101.88 $2,232.73 $130.85 6.23%
FAS 07/15/2009 07/23/2009 $2,232.73 $2,303.83 $71.10 3.18%
FAZ 06/25/2009 07/02/2009 $2,000.00 $2,076.92 $76.92 3.85%
FAZ 07/02/2009 07/06/2009 $2,076.92 $2,182.18 $105.26 5.07%
FAZ 07/06/2009 07/08/2009 $2,182.18 $2,259.78 $77.60 3.56%
FAZ 07/08/2009 07/08/2009 $2,259.78 $2,304.09 $44.31 1.96%
MWJ 06/26/2009 07/01/2009 $2,000.00 $2,072.25 $72.25 3.61%
MWJ 07/01/2009 07/16/2009 $2,072.25 $2,121.94 $49.69 2.40%
MWJ 07/16/2009 07/20/2009 $2,121.94 $2,201.15 $79.21 3.73%
MWJ 07/20/2009 07/21/2009 $2,201.15 $2,251.14 $49.99 2.27%
MWJ 07/21/2009 07/22/2009 $2,251.14 $2,306.50 $55.36 2.46%
MWJ 07/22/2009 07/23/2009 $2,306.50 $2,401.19 $94.69 4.11%
MWJ 07/23/2009 07/23/2009 $2,401.19 $2,440.62 $39.43 1.64%
MWJ 07/23/2009 07/24/2009 $2,440.62 $2,477.96 $37.34 1.53%
MWN 06/26/2009 07/02/2009 $2,000.00 $2,069.79 $69.79 3.49%
MWN 07/02/2009 07/06/2009 $2,069.79 $2,179.95 $110.16 5.32%
MWN 07/06/2009 07/08/2009 $2,179.95 $2,279.99 $100.04 4.59%
TMF 06/19/2009 06/23/2009 $122.86 $130.95 $8.09 6.59%
TMF 06/19/2009 06/25/2009 $1,877.14 $2,007.73 $130.59 6.96%
TMF 06/25/2009 06/26/2009 $2,007.73 $2,082.90 $75.17 3.74%
TMF 06/26/2009 07/08/2009 $2,082.90 $2,147.71 $64.81 3.11%
TMF 07/08/2009 07/10/2009 $2,147.71 $2,195.88 $48.17 2.24%
TNA 06/25/2009 07/01/2009 $2,000.00 $2,087.04 $87.04 4.35%
TNA 07/01/2009 07/16/2009 $2,087.04 $2,133.19 $46.15 2.21%
TNA 07/16/2009 07/20/2009 $2,133.19 $2,180.79 $47.60 2.23%
TNA 07/20/2009 07/20/2009 $2,180.79 $2,228.33 $47.54 2.18%
TNA 07/20/2009 07/22/2009 $2,228.33 $2,284.59 $56.26 2.52%
TNA 07/22/2009 07/23/2009 $2,284.59 $2,401.57 $116.98 5.12%
TNA 07/23/2009 07/23/2009 $2,401.57 $2,440.83 $39.26 1.63%
TYD 06/25/2009 06/26/2009 $2,000.00 $2,062.11 $62.11 3.11%
TYD 06/26/2009 07/07/2009 $2,062.11 $2,094.71 $32.60 1.58%
TYD 07/07/2009 07/09/2009 $2,094.71 $2,129.31 $34.60 1.65%
TYD 07/09/2009 07/10/2009 $2,129.31 $2,188.09 $58.78 2.76%
TYH 06/25/2009 07/01/2009 $2,000.00 $2,096.58 $96.58 4.83%
TYH 07/01/2009 07/16/2009 $2,096.58 $2,180.52 $83.94 4.00%
TYH 07/16/2009 07/16/2009 $2,180.52 $2,256.66 $76.14 3.49%
TYH 07/16/2009 07/17/2009 $2,256.66 $2,297.18 $40.52 1.80%
TYH 07/16/2009 07/20/2009 $2,256.66 $2,388.18 $131.52 5.83%
TYH 07/20/2009 07/21/2009 $2,388.18 $2,431.14 $42.96 1.80%
TYH 07/21/2009 07/22/2009 $2,431.14 $2,492.98 $61.84 2.54%
TYH 07/22/2009 07/23/2009 $2,492.98 $2,583.29 $90.31 3.62%
TYP 06/25/2009 07/02/2009 $2,000.00 $2,083.79 $83.79 4.19%
TYP 07/02/2009 07/06/2009 $2,083.79 $2,171.67 $87.88 4.22%
TYP 07/06/2009 07/07/2009 $2,171.67 $2,222.06 $50.39 2.32%
TYP 07/07/2009 07/07/2009 $2,222.06 $2,261.25 $39.19 1.76%
TYP 07/07/2009 07/08/2009 $2,261.25 $2,322.36 $61.11 2.70%
TZA 06/25/2009 07/06/2009 $2,000.00 $2,160.03 $160.03 8.00%
TZA 07/06/2009 07/08/2009 $2,160.03 $2,299.96 $139.93 6.48%
TZA 07/08/2009 07/10/2009 $2,299.96 $2,347.54 $47.58 2.07%
Well, after adding in the figures tonight my "play" system has returned $5,180.27 or 12.95% from the initial "investment" of $40,000. This from 25 June 2009 through 20 July 2009. The highest valued of these 20 3x ETF's is EDC. The trading history as follows:
Symbol Buy Date Sell Date Purchase Amt Sell Amt $ Gain Pct gain
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%
Hi, Blasher,
yep. In the time you've been away we've had that inverse-pair discussion and have concluded that it won't work in the long term due to the historical rise in the market. The gradual "up" works against the bear side continually going down. In some short term situations it would be awesome, but not the more long term AIM type investing.
Best,
AIMster
DOn't understand the impact of selling and re-buying same security.... doesn't that leave you at the same place (eg if ETF goes up 10%, selling and rebuying results in 10% fewer units if you remove the gain (same number of units if reinvest total amount, including gain))? Am I missing how that leads to compunding?
Hi,
The re-buying idea is my derivative (pardon the word) of the "Pay Trading" system applied to the fixed universe of the 20 3X ETF's currently available. In the original "Pay Trading" system, one looks to buy stocks that are just upgraded, profiting from the expected rise due to the good news. Naturally this means tracking a larger universe of potential stocks specifically to find good candidates. The goal of the Pay Trading is the same as Lichello's, i.e., to use a mathematical certainty in reaching $1,000,000. Starting with $2,000, factor in a gain of 1% and 625 loops through the cycle, presto, you've got $1,004,358.15. Average a higher rate of gain and you'll get there faster than the 625 loops. In the Pay Trading scenario you'd take the original investment, plus profit, then roll it over into the next holding, and so on. Since we're limited in this case to only 20 funds, we have to re-invest in order to capture gain and thus follow the trend, which can turn quickly, I should add. Though I've also had same-day sales as well.
From Eric Shawn's e-book, see http://www.paytrading.com
"Because I knew I could securely earn a small percentage on these opportunities, even as little as 1 percent, over and over, I knew that if I succeeded in doing so on average of about once a week, each trade would be the equivalent of earning a 67.8% annualized gain, which, as anyone proficient in math knows, would grow an initial investment of $2000 into $1,000,000 in about ten years. In other words, beginning with two thousand dollars, you just need to increase your total balance by one percent on 625 occasions to equal one million dollars. Do this on average of once every 6 calendar days, and less than ten short years will have passed. The more frequently you average those profitable sales, the fewer the years until the million-dollar goal. By the same token, the more money you begin with, the fewer the years. ($30,000 becomes $1 million in about 5 and one half years.) Those years are going to go by anyway. You may as well become a millionaire during them...
5. After my buy fills, I then immediately set a limit sell order, good 'till cancelled, (GTC) for precisely 1% greater than my purchase price. My trading is done.
6. I then shut down the browser, because it doesn't help the stock climb if I sit there sweating bullets because it has temporarily moved below my buy price, or because it's fun to watch it skyrocket. Instead, I begin my workday and check on the stock at the day's end. Absolutely rational.
7. If the stock has not sold, I wait until it does, no matter how long it takes. Period. I never take a loss..."
(emphasis added.)
The question is how can one increase the frequency of the loops to allow for the shorter time interval required? I believe these 3x funds are the key. Why?
First, they aren't specific stocks. You don't have to peruse all sorts of info checking for downgrades/upgrades, the reliability of such information perhaps being questionable due to timeliness or accuracy.
Second, you get the benefit of the leverage that these move at. So consistently getting a higher return of at least 1.5% to a so-far high of 9.65% on a given holding is more easily realized than hopping from one stock to another. These funds just use the inherent volatility of the market itself either in a broad-base or specific sectors and riding the trends of that.
Third, you're automatically realizing and reinvesting the profits, making each additional move that much larger on a dollar basis for the same percentage value. A 10% move on $2000 yields $200. 10% on $2200 yields $220. And so on.
Fourth, you're limiting each transaction to a single tax lot, rather than multiple lots. Note again as I said originally, the relatively frequent trading makes these suitable for a tax-deferred account.
How's it going?
Well, on 25 June I set up a "test" folio with $2000 allocated to each for a hypothetical balance of $40,000. Fun the stuff you can do with play money! Over the last few weeks the return before today's been over 11% overall. My best of the bunch is currently valued at $2517.36 or over a 25% return in 3 weeks, the worst of the lot's at $1500.78. But they made trade places over time. So I have 20 holdings each marching to the beat of their drummer toward the $1,000,000 goal. I'll keep the play going for a while and then who knows, I just might take the plunge...
Best,
AIMster
Nothing hurt or lost by watching this play out over the next few weeks and months is there? Any thoughts from the board as to our current risk level? How does this get paid back? Either massive tax increases or massive spending cuts at the state levels wouldn't seem to bode well going forward. Am I wrong here?
That's been my question now for the longest time, how does it all get paid back? We have deficits without end, ambitions to [rightfully] spend money on things of human interest such as health care, which I'd rather spend for than wars without end, given a choice. Dr. Paul Krugman in the NY Times has said that we need more stimulus dollars, but I've yet to see how he proposes repayment.
Already there are cracks in the post-WW II legacy of the US Dollar remaining the reserve or base currency of choice. Any shift to Euros or Yuan or some as yet nonexistent international "Global" as a currency will for sure change the way of life here.
Either they take the more prudent way of dealing with the debt, either by raising taxes, cutting spending (or both) or they really slam us all to the wall and inflate their way out. Just look at Zimbabwe if you want a case study in current economic devaluation via inflation. Germany in the late '20's early '30's I don't think got as bad as this, or it's a pretty close parallel! Given that we already have a fiat currency that's about as real an item of value as are the Emperor's clothes, when someone points out the all-too-obvious that the Emperor and the rest of us are running around buck nekkid in terms of having a currency of any value, then you'd best duck. At that point the stuff will all hit the fan, and those fans will be on high speed, too!
Hi, Ken,
I recently did the free Vector Vest email offer thingy.
Let us know what you think. I found myself constructing all sorts of tests that coulda, woulda, shoulda have made me fabulously rich if I'd only done weeks or months ago to get to where things are now. Like cherry picking in a cherry orchard, but in the end I was not so impressed. Of course, that was several years ago, though I think they're underlying premises are still the same, even if the interface may have been jazzed up by now.
Thanks,
AIMster
Leveraged ETF's - another option?
I've been doing more pondering the use of these leveraged ETF pairs. Our previous thoughts have been predicated on the assumption of using them in one form or another in an AIM context. That is, instead of the original AIM idea of a split between a cash reserve and a stock holding, one would somehow or other shift money between the bull and bear segments as one rises or falls against the other. The problem we've figured out that limits such a scheme is the long term upward move of the market, making the long-term performance of the bear side ineffective.
What, however, would be the consequence of considering each holding separately more in the idea of something like an option? By this I mean you make a single purchase of (to keep this simple), $5,000 on each side. You already limit your risk to $5000 in each fund. This also locks in the risk as you won't be using the AIM idea to buy more at lower price, increasing your risk. Though admittedly this risk is less by virtue of being a fund, rather than invested in individual stocks. Now, since these particular funds maximize the volatility to a 3x level, even a relatively modest day in the general market can make these funds shift more dramatically. One might easily have a 5% or so gain in one, loss on the other in a day or so.
This is where it starts to get interesting. Say the next day you sell out, taking the 5% gain, or in this example, $250. What to do then? Well, you have, pardon the expression, several options. The first would be to bank the cash and re-invest the original $5000 again, wait for another move, keep repeating the cycle. Several of these in a month's time and you could be generating quite a return. What you do with the cash in this context is up to you. You'll note that there are ten pairs of these leveraged funds or twenty to start with. One could follow the general idea of option 1, but use the cash as a savings to buy another pair of these leveraged funds. Once you have two pair of these things going, the daily take might be $500 per trip. That would finance the third pair even more quickly. And so on, until you are invested in all twenty.
I recommend eventually investing in all twenty for the simple reason that there will be times when perhaps both of a given pair might be in a loss condition. Other pairs will likely move on different cycles, improving the odds that the income stream will be reasonably constant. Keep in mind that on the ones that are losing money, you can't lose more than your original investment.
This now brings us to being fully invested in all twenty funds and ready to run this system full throttle. Instead of siphoning off the cash each time to something else, take a new position in the fund with the whole amount. You're limiting the risk to the amount of the investment. Do that often enough and the compounding will make quite a difference.
As for the funds for which you're holding a paper loss? Let them sit there for now. As the market switches between bull and bear phases, you'll already have a position in, ready to start taking money from that trend when it switches from a loss to gain modality.
This is admittedly different than what we've been used to. But I think it makes sense to view these in a very short term trend capturing way, rather than as something more conservative. But you'll always be in for either type of market movement. Naturally given the short-term nature involved, this is best for a tax-sheltered account.
Thoughts?
Clive and I were discussing the leveraged TMF and TMV pair - I found a listing of all these 3x funds, if anyone wants to do any research on their own as well:
Symbol Fund Index/Benchmark Daily Target Bloomberg Index Symbol
Bull
BGU Daily Large Cap Bull 3x Shares Russell 1000 300% RIY
MWJ Daily Mid Cap Bull 3x Shares Russell Midcap Index 300% RMC
TNA Daily Small Cap Bull 3x Shares Russell 2000 300% RTY
ERX Daily Energy Bull 3x Shares Russell 1000 Energy 300% RGUSEL
FAS Daily Financial Bull 3x Shares Russell 1000 Financial Services 300% RGUSFL
TYH Daily Technology Bull 3X Shares Russell 1000 Technology Index 300% RGUSTL
DZK Daily Developed Markets Bull 3X Shares MSCI EAFE Index 300% MXEA
EDC Daily Emerging Markets Bull 3X Shares MSCI Emerging Markets Index 300% MXEF
TYD Daily 10-Year Treasury Bull 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index 300% AXTEN
TMF Daily 30-Year Treasury Bull 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index 300% AXTHR
Bear
BGZ Daily Large Cap Bear 3x Shares Russell 1000 -300% RIY
MWN Daily Mid Cap Bear 3x Shares Russell Midcap Index -300% RMC
TZA Daily Small Cap Bear 3x Shares Russell 2000 -300% RTY
ERY Daily Energy Bear 3x Shares Russell 1000 Energy -300% RGUSEL
FAZ Daily Financial Bear 3x Shares Russell 1000 Financial Services -300% RGUSFL
TYP Daily Technology Bear 3X Shares Russell 1000 Technology Index -300% RGUSTL
DPK Daily Developed Markets Bear 3X Shares MSCI EAFE Index -300% MXEA
EDZ Daily Emerging Markets Bear 3x Shares MSCI Emerging Markets Index -300% MXEF
TYO Daily 10-Year Treasury Bear 3x Shares NYSE Arca Current 10-Year U.S. Treasury Index -300% AXTEN
TMV Daily 30-Year Treasury Bear 3x Shares NYSE Arca Current 30-Year U.S. Treasury Index -300% AXTHR
Just found two (long and short) triple x TLT ETF's
TMF and TMV
So, as The Brain would say to Pinky, "Are you pondering what I'm pondering?" If these two merely pair off against each other as a function of their price movements without any inherent upward market bias that ruins the perfectly good long-term relationship between a similar pairing of long and short stock ETF's we might all be joining you in being outfitted for one of those nice white coats you mentioned a message or two back.
Since the divergence in price has already happened, see http://stockcharts.com/charts/performance/perf.html?TMF,TMV where would you start? To keep it simple, would you put say $5k into each one, shifting the money back-and-forth over time as one reports the loss, using the corresponding gain? Or would you buy $5000 of TMF, using any reversion to the mean profit to gradually fund a position in TMV?
Best,
AIMster
1) I'll have to give adding the number of shares to trade to the Portfolio Manager some thought. For multi-equity portfolios, this won't work and so won't be consistent. On the other hand, you can always double-click on the portfolio in the portfolio manager list and view the number of shares to trade on the main window (I know, it's an extra double-click). I'd like to keep it consistent so I'm leaning towards not doing that (but I'll do some thinking on it).
I can see where that would be problematic on the portfolio mnaager screen, but perhaps it could be added to the report - on a multi-holding portfolio the report might need to list each possible holding as a sub-line, but I think giving this to the report would be less intrusive than modifying the main screen.
AIMster
Hi Ryan,
It seems that the win zip file contains some files that end in a "." a dot by itself. This is an illegal convention from the holdover from DOS days as the . refers to the local directory (or folder itself). You might find the same problem with Linux.
Starting it up it crashes with "an exception of class NilObjectException was not handled. The application must shut down."
BTW the titlebar calls it AIM II V5.0 Alpha - shouldn't this be the Beta?
Best,
AIMster
I should perhaps mention Ryan that even Grid trading apparent mean reverting holdings such as Forex eventually kills the freight train chicken player as you'll see if you wade through all the Grid trading discussions on the net. I know its not the exact same, but it's close enough to likely suffer the same fate.
I still have to look at the software, but if I understand the short blurb on the underlying premise doesn't it sound somewhat like trying to pair a long and inverse pair of funds against each other, switching between the two as they move? I recall we negated the long-term effectiveness of such due to the historical long-term upward bias in the market overall. So in the short term it might work, as would a chicken crossing the rail tracks. It's that "SPLAT!!" that gets you.
Best,
AIMster
From the food for thought department:
Even in tough times, people still have to eat. B&G Foods out of New Jersey makes a variety of foods plus a lot of condiments to give more flavor. Their chart seems appetizing enough for AIM plus they offer an 8.6% dividend. Yummy.
bon appétit!
The only way to improve upon gains is to narrow the top/bottom range or increase the trade size whilst keeping the top/bottom range the same, which is the same as taking on more risk.
Or, the inevitable correlation between risk and reward. The goal, of course being the greatest possible reward for the least amount of risk. The so-called "efficient frontier." Which unfortunately is so nebulous it's akin to grabbing a Jell-o snake in a room full of Wesson oil. (Not sure what the British brands would be but a gelatin snake in room full of cooking oil may make the analogy universally understood! <grin>.
Best,
AIMster
Praise God, good news. I launch the beta of AIM II on Monday. The software is going to be called simply, 'The Advantage' but I still may use the term AIM II, from time to time, to refer to the algorithm. I'll post all the details then.
Congratulations. Nothing like seeing a project come together like that. We'll look forward to more news.
Meanwhile, are you looking for any master betas for testing?
Curious.
Best,
AIMster
If anybody's got a bit of cash around to put into something, I've found a Chinese drug chain ADR that's fairly cheap and gives a 7.3% dividend yield to boot. It's NPD (China Nepstar Chain Drugstore Ltd). Reading Yahoo Finance's spiel makes it sound much like CVS or Walgreens here:
China Nepstar Chain Drugstore Ltd. operates retail
drugstores in the People's Republic of China. Its
drugstores provide pharmacy services and other merch-
andise, including prescription drugs; over-the-counter
drugs; nutritional supplements, such as various
healthcare supplements, vitamins, minerals, and
dietary products; herbal products, including drinkable
herbal remedies and packages of assorted herbs for
making soup; and private label products under
Beautiful Life, Qianlong, and Wisconsin brand names.
The company's stores also offer personal care products,
such as skin care, hair care, and beauty products;
family care products, including portable medical
devices for family use, birth control products, and
early pregnancy test products; and convenience products,
such as soft drinks, packaged snacks, other consumables,
cleaning agents, and stationeries, as well as seasonal
and promotional items. As of December 31, 2008, its
store network comprised 2,709 directly operated stores
located in 12 provinces and 76 municipalities in the
People's Republic of China. The company was founded in
1995 and is headquartered in Shenzhen, the People's
Republic of China,
Their chart:
Makes it fairly cheap to start taking AIM at.
Another couple for the suggestion box would be for the report off the portfolio manager screen to list the number of shares to buy or sell along with the dollar amount. Sorting the report to group all the buys, sells and holds together would be helpful too.
Thanks!
AIMster
Way back at the 2001 AIM gathering after Mark gave his Efficient Market presentation, I recall posing a concept of an Efficient Volatility Index. If one were able to derive such a number using standard deviation, variable Zig-Zag (of some sort) via use of TA measures such as W%r, etc; then one might be able to use it to assist in moving from the standard 30% spread towards one that better 'fits' the holding's personality.
Which gets back to my idea of some time ago of having a system be able to "learn" the personality of the holding(s) as time progresses and then adjust the settings for you accordingly. AIM with some AI (artificial intelligence) behind it, if you will. Of course there are still the tidal waves of change such as what we saw going into last Fall and through March of this year that are probably systemic enough to skew the efficiency of such a system (or any system that goes long), but if it had the knowledge of such an extreme within the memory it would (in theory) be better able to adapt to future similar patterns.
I don't know enough about AI programming to create such a system, especially dovetailed to AIM as it would have to work AIM as the 'prime directive," using knowledge from watching the price changes and buy/sell recommendations and follow-thrus in a supplementary way to reach the first objective.
Sounds like a road worth exploring, if we can find a cheap yet effective way to do so. And someone with the time and smarts to set it up and make sure it's working to plan.
Best,
AIMster
Way back when I was using AIM (before AIM II), I tweaked it for volatility and then just traded only volatile stocks.
That is consistent with Lichello's intent to have the volatility work with the investor, rather than being just a totally dead weight with respect to Mr. Buy & Hold. If you take the B&H approach you need to decide if you're going implement a stop-loss process, or just run with it out for the duration, taking your chances on an eventual recovery. This can be somewhat mitigated by holding dividend paying items as they do offer a measure of compensation for your time.
So, in generalities, unless you want to get to the specifics, how does your AIM II deal with this issue?
Curious.
Best,
AIMster
I know that One Size does not always fit every fund. In another life with other software I was able to Performance Tune each one. Because Mutual Funds are like people, were all different. So does anyone Performance Tune Funds with the Configuration available in Automatic Investor.
Hi, Jim,
You've hit on one of the interesting philosophical areas regarding AIM. In the book, Lichello advocated dealing with one's entire portfolio as a single entity, remember a secondary goal of his being to keep things simple in the pre-personal computer age. One may find, however, as your post alludes, that AIM may work more effectively when each holding is run individually within it's own program. The whole portfolio approach will allow you to have a single cash reserve for the whole lot, giving you discretion as to what will be bought or sold whenever AIM gives a recommendation. AIMing each individually will require multiple cash reserves and so on. Lichello also wondered how this would play out if one holding keeps sucking money for more purchases, whilst others may be flush with cash. These and other arguments can be made for the pros and cons of each approach. Each may have adherents, though I think the dominant view is to run each separately.
In terms of adapting AI configurations on an individual basis, one tool that gives a good visual is the stockcharts.com zigzag function. As I recently posted for Jet Blue, the "standard" 10% buy & sell SAFE + 5% min trans on each side correlates to the 30% tracement of the zig-zag. 10+10+5+5=30. Thus a trip from a bottom to top would give a 30% gain on a LIFO basis. Not too shabby! It's a question of finding a balance where you keep your costs reasonable, get a reasonable number of trades and each trade being worth the trip. Using Jet Blue again, let me post some variants:
1) Our standard 30%:
2) Now we up the zig-zag to 40% which matches the AIM-HI of 10% for each of the values:
With these, not too different from the 30% so the larger range may be suitable for this particular stock.
3) dropping to a 15%:
Here we start to see more trades for less gain per trade. Worth doing? This is where AI's historical tester can help, but take with grain of salt as it's very easy to start changing the configs to find the "optimum" setting - but this is what would of worked in the past and may be absolutely horrid for the future. Also the results are predicated on the end-of-day prices, not the actual fill prices that you would have likely gotten.
So between the stockcharts and the historical testing we can get some idea of the "personality" of a holding. Then adjust the model for that holding accordingly.
More questions? keep posting!
Best,
AIMster
Jet Blue does look like a contenda! Take off, eh?
Running Automatic Investor historical analysis from Jan 2008 through present returns:
This by the way using the "Classic" by-the-book original AIM 50/50 model.
AUTOMATIC INVESTOR HISTORICAL ANALYSIS FOR JBLU
======= PERFORMANCE =======
Current Portfolio Value: $15,416.04 (3036 shares owned)
Profit or (Loss): $5,416.04
Simple Return: 54%
Annualized Return: 36%
Buy/Hold Portfolio Value: $9,246.42 (1838 shares owned)
Buy/Hold Profit or (Loss): ($753.58)
Buy/Hold Simple Return: -8%
Buy/Hold Annualized Return: -5%
Return on Capital at Risk: 73.21%
Average % Capital at Risk: 73.98%
My copy of the program will not open if I don't have an internet connection. It apparently wants to "phone home" to validate the copy each time it is opened.
You're correct. That's the mechanism in place now to confirm the bona fides of the software. Other solutions exist, some probably better than others, probably also at various expenses of cost in terms of registering for Mark's use and implementing in the development environment he's using. This seems to work reasonably well, though having to be tethered to the 'net can be a problem if one's connection's lost or the routing gets messed up between you and his validating server. Most of the time, though, it works seamlessly.
Best,
AIMster
That beep is actually a system beep that is automatically played when a warning window pops up. So I can't have AI disable it without affecting the rest of the system.
I get it, not a "bug," a feature! <grin>
Your suggestion sounds good. Look forward to it!
Thanks,
AIMster
New feature request:
A switch under tools to turn the sound on or off. When one gets multiple recommendations when updating all holdings, that Windows default beep gets a little irksome after the first couple.
Thanks!
AIMster
I have been testing Automatic Investor and it looks good to me. Is this the most used software for A.I.M. investors. I know their are others that work but it looks like this was developed just for the A.I.M. crowd.
Hi, Jim,
I've found AI to have a very robust feature set and Mark Hing as the author has certainly put a lot of time into it. He's also been responsive to bugs as well as adding new features or improvements as time's gone on. I suppose the graphics could be improved, everyone seems to have a fondness for the Newport graphs, but Mark's got to work with what's available to him in the development environment. The graphics supplied are functional and do give the relevant data. There's just a crispness that the Newport graphs have that make them visually efficient. Then again, Newport may not have the pie-chart breakdowns and other graphs that AI does.
As for the most widely used, AI is likely so amongst current software offerings. Newport, despite the antiquity does seem to have some holdouts. (Note Newport isn't available right now, so I'll spare you from asking where you can get it <grin>).
For working with AIM as an investment paradigm, Automatic Investor software does fill the bill admirably. Optimization, historical testing, wide variety of configurability allow you to "tune" your AIM programs just about any way you'd like to. From strictly by-the-book, to a model with all the latest variants turned on and running. Like the man says, "it's your investment, take control of it!"
I give it a thumbs up!
Best,
AIMster
I typed "trading desk picture" into google
Whilst it looks impressive, one would think an actual user would suffer from extreme information overload and would therefore run a greater risk of hitting "buy" when they really meant "sell." Oops. The AIM system seems more dedicated to single-function purpose.
Best,
AIMster
The biggest resource hog of AIM II is not the power it needs but in the monitor size that it requires. Too much to display.
Sounds interesting. How much does it show?
What about everyone else? What monitor size are you running in terms of pixel resolution.
Well, the resolution is somewhat low at 1360 * 768. That being said, though, it's also on my 37" flat-screen that doubles as my TV set. So it's a pretty good size monitor, if lacking, ironically in real estate...
Best,
AIMster
Hi MM, I think Grabber is Psychedelic, not Psychic.........
Groovy!
I couldn't resist!
AIMster
What I pointed out is that what I hear quite often on this Forum (just my opinion, of course) is that AIM-drivers are advised to "keep it simple" as if AIM is supposed to be kept "simple" rather than to advice "to learn the ropes" and then attempt to turn the simple AIM into a F1 AIM. . . . That's more or less how I created Vortex AIM. If one sticks with a Simple AIM then the returns remain poor. I would rather advice newcomers that trying to create an AIM Monster that is foaming at the mouth when the start shot is given will be a very rewarding exercise.
What we have here is not a failure to communicate, but rather coming to the same problem from different perspectives and experiences as well as differing general advice for investment as a whole.
One major debate between two investment schools concerns active versus passive investing. The "activists" feel that by studying charts, seasonal trends, fundamentals, the i-Ching, tea leaves, goat droppings under the full moon, sophisticated computer models or any other sort of tool with which to analyze and therefore time not only one's picks, but holding periods as well, you can outperform the market. And some do. Some of the time. Mutual funds work like this. And so every year they get ranked. As more and more money flows into those funds, the ability to maintain the performance level drops, so often this year's hot performer becomes next year's dog. And it's equally catastrophic if too many try to bail from a fund at the same time. Just ask Bernard Madoff.
The "passivists" on the other hand, feel that "activism" is an exercise in futility, given the increased trading costs, taxes as mutual fund gains get passed back to shareholders as well as the usual case where any market inefficiency that a fund manager may be exploiting will be quickly copied once discovered and therefore lose the edge. Their counsel is to suggest holding low-cost ETF's in primarily an asset-allocation scheme, rebalancing between the various sectors as needed, though at infrequent intervals to minimize cost and potential tax impact. Passivists also advocate infrequent trading, taking a very simple approach to investing realizing that getting the market's return will still put you ahead of most "activist" mutual fund managers, especially over the long haul!
I would suspect that Mr. Lichello would place himself closer to the "passivist" school of thought. "Simple" AIM is a middle ground between these two to an extent. It's somewhat more active than being totally passive, but rather than arbitrary decisions it uses mathematics to determine not only how long, but by how much one should be in or out of the market. I suppose one could argue the purity of LD-AIM or MyWay to take one totally out as there may be such times of irrational exuberance, but nonetheless regular AIM seems adequate enough to the task. The downside is that passive investing and even using AIM in this way is, well, boring.
Thus in our urge and impatience to become activist investors, we try and however unrealistically turbocharge AIM into something that will give us the $1,000,000 next week instead of over several years. But then we can fall into all the traps, or ones of similar nature that the passivists warn us of. And if any of us have spreadsheet skills or a programmer's bent, heaven help. For we all become little Lichello's, not investors using a system, but ever the tinkerers. That's why he had to defer the direct answer if HE made a million using his own AIM. Taken to logical conclusion, why bother with AIM at all? Why not just start from scratch, invent one's own system? People do all the time. And some figure out how to make real money, not by using getting people to use their system, but to design a system where people have to pony up money each month for data updates or the latest prognostications from the crystal ball.
So I think it's the active/passive debate that fuels the perception of how we feel people should approach AIM. Some lean toward a more activist mode, working to enhance the basic tool we start with, whilst others are content to favor simplicity. In all likelyhood there is no one right answer. The appropriate answer depends on the person, how much they have to invest with, how much their ongoing costs are, and whether they want to dedicate the time and energy toward building the better mousetrap, or see how many mice can be caught using the existing specs.
Best,
AIMster
It is fine to talk about tweeks but I will always recommend that beginners get their head around basic AIM first.
Thank you, Toof,
My point exactly!
Best,
AIMster
Good Point. However, one also has to put our 'Enhanced Performace Techniques' into context with the realities of investing in the markets when RL originally wrote his book versus today's.
I do get your points also, really. My point is for those newbies just getting their feet wet with AIM as a concept & before they get a decent understanding of how it's supposed to work in the first place they're already bored with it and are off to improve it before they even really understand what it is they're trying to improve!
Like a kid who's given a cake mix in a box and decides he can do a better job than that by making a cake from scratch. Quite possible, but try the cake from the mix first to see how it works, how the ratios of all the ingredients work together to make the good cake. Practice a few times with those before you attempt the ones from scratch. You'll have far better luck knowing how baking powder versus baking soda will affect the end result - and I'm speaking from experience on that one when I was a kid! <grin>.
Information and Computational Availability:
The internet really has presented a 'New Paradigm' to the investment community. It is no longer reserved for the elite.
Agreed. The downside though is that one can drown in so much information, so many so-called "gurus," and their newsletters, spend thousands on "systems" or software or classes to master TA and other things or be held hostage to ongoing subscriptions. Or spend $7.99 (or less) one time on Lichello's book, add access to a spreadsheet or 13 column paper and Toofuzzy's free online calculator and off you go, free of the siren song of the Jim Cramers of the world and what's been called so much "investment pornography."
I believe in AIM improvements as much as the next person. But I also believe in learning the fundamentals of AIM, working with it in the default settings to see how it works in the real world before learning the advanced options. Then one can consider which of the advanced options make the most sense to incorporate into one's programs. Or not.
Lichello ended the 4th edition with an almost zen-like homage to simplicity as a spiritual virtue as an investing paradigm for life. In our overly complex world, his concluding ideas are not without merit either. The most important is to always have some dry powder (cash reserve) available for whatever the market throws at us. That is our only surety of future success, no matter how simple or complex our route in getting there.
Namaste'
Best,
AIMster
I see plenty of complex attempts to squeeze more blood from AIM. . some of which go over my head but the fact that such techniques are suggested is a good thing.
I agree with you, Conrad,
Where I was more concerned is with someone like Cindy who's new to AIM and is excited at the prospect of what it can do. But before she's even used it long enough to get a feel for how it works at the default settings she was already interested in increasing the number of trades and getting impatient with the whole process!
She wrote:
"I keep hearing the same message expressed clearly by Toofuzzy:
The typical settings were designed for average conditions and are altered at your peril!
I seem to want to make AIM more exciting by increasing
trading or improving profits or whatever-
Which isn't a bad thing, per se. The one quality that Mr. Lichello left out is excitement for the end user in actually using AIM. People easily get excited over the concept! It takes patience and time for AIM to work the market. In an environment of instant gratification, 24 * 7 online entertainment at the click of a mouse or push on a TV remote, getting a result the old fashioned way is difficult. It's, well, boring.
Perhaps we need to build the "money machine" he wrote of. A take on a pinball or pachinko board with lights, sounds, all sorts of "eye candy" to feast the senses whilst the "score" manifests in the growing value of one's portfolio. Hey, maybe at the next conference in Vegas we can take a core of a discontinued slot or video poker machine and do something with that.
Seriously, though, it is good to want to improve one's return. But one can more easily do so when one understands the working of the process to get you there.
Best,
AIMster
I am testing it with a S&P 500 Fund
Hi, Jim,
To continue from the last post...
AIM is a mechanism to capture the volatility of a security (or fund) as the price goes up-and-down over time. It implements the often spoken of, but seldom implemented wisdom in the market maxim to "buy low, and sell high." It does so by emphasizing taking a contrarian trend, i.e., if people are buying, you're selling, they're selling, you're buying. The goal being to profit on future retracements over up-and-down cycles.
Point of all that being that the S&P 500 is not the most volatile of investments and you won't see the benefit from using AI with it as you might other holdings. A sector fund, for example,will still give you the benefit of being in a fund, rather than a single stock but is likely to move around more in price than something as broad-based as the S&P 500.
Using SPY (an S&P 500 ETF) from 1 Jan 2000 through present returns this (from the AI historical testing data the "conservative" configuration setting (under the tools menu):
AUTOMATIC INVESTOR HISTORICAL ANALYSIS FOR SPY
======= PERFORMANCE =======
Current Portfolio Value: $9,577.51 (107 shares owned)
Profit or (Loss): ($422.49)
Simple Return: -4%
Annualized Return: 0%
Buy/Hold Portfolio Value: $7,140.20 (79 shares owned)
Buy/Hold Profit or (Loss): ($2,859.80)
Buy/Hold Simple Return: -29%
Buy/Hold Annualized Return: -4%
Return on Capital at Risk: -6.11%
Average % Capital at Risk: 69.09%
Analysis run on 26-May-09
Daily Price Data Chosen
Using IYE the energy ETF for the same period:
AUTOMATIC INVESTOR HISTORICAL ANALYSIS FOR IYE
======= PERFORMANCE =======
Current Portfolio Value: $16,202.21 (337 shares owned)
Profit or (Loss): $6,202.21
Simple Return: 62%
Annualized Return: 6%
Buy/Hold Portfolio Value: $18,506.07 (641 shares owned)
Buy/Hold Profit or (Loss): $8,506.07
Buy/Hold Simple Return: 85%
Buy/Hold Annualized Return: 7%
Return on Capital at Risk: 125.56%
Average % Capital at Risk: 49.40%
Analysis run on 26-May-09
Daily Price Data Chosen
Note while it didn't seem to do as well as buy-and-hold in terms of dollar amount at the end of the test, it did return what it did with less than 50% of your capital at risk!
Best,
AIMster
Anyone, New here. I am test driving AI for 10 days and want to get to know it as much as I can. Am I correct AI interfaces with my broker? I am testing it with a S&P 500 Fund from Schwab where I already have an account. Will it interface with Schwab or just stock brokers?
Hi, Jim,
AI is a standalone program that gives recommendations to buy, hold, or sell, based upon the investing algorithms developed by Robert Lichello. As such, you are the interface between any recommendations and your broker. Some people use GTC orders so they can trigger "automagically," others go for a market order approach, closer to real-time.
The algorithms mentioned are defined as "AIM," or "Automatic Investment Management." Mr. Lichello defined the development of and rules for AIM in the book, "How to Make $1,000,000 in the stock market automatically." ISBN: 9780451204417. I grant the title is "hokey" but the underlying methodology is based on mathematics and helps to remove emotional decisions from the investing process.
Aside from this AI board specifically there is a general AIM board where theory questions as well as implementation ideas and improvements are always under discussion. Your questions and comments will be welcomed.
see: http://investorshub.advfn.com/boards/board.aspx?board_id=949
Best,
AIMster
How to do this is a much more difficult question to answer. Because you'll always run into the same problem. When the bear market kicks in, how will either algorithm know in order to keep AIM from buying what it thinks are cheap shares, only to discover the market is headed much lower.
Such is a problem not only for AIM, but most any "system" at all. No one has yet figured out how to get perfect reception through a crystal ball. I would suspect that even AI programs for all of their calculating intelligence are left stumped if all of the irrational humans decide to all jump off the cliff of selling like lemmings all at once!
I suppose one could argue for some sort of feedback loop particularly on the buy side, owing to the finite amount of cash reserve available that would act like a circuit breaker to slow down the buying process if under extreme duress. People do this manually to some extent by deferring sequential buys to monthly intervals. One way would be by resetting portfolio control to a prior level so that the next buy would be for the same dollar amount as the last, rather than being increased. This could come into effect if the price difference between the last buy and the current price exceeds a given safety margin (25%) - you could add a further test that this also kicks in if the cash reserve level is <= a given value, the idea being to maximize the cash reserve.
Just a thought.
Best,
AIMster
A
Hi, Mark,
Request:
Might have mentioned this one before but it would be nice to have the columns in the portfolio manager window sortable by column heading. This would sort the portfolios in alpha order, or group all the buys, sells and holds together too.
Thanks!
AIMster
Hi, Conrad,
Good post! We get into the philosophy of investing in general and AIM in particular. Good stuff!
Why is talking about AIM worthwhile but spending a lot of time developing better AIM systems not?
Talking about AIM is akin to the parable of giving a person a fish, versus teaching the person how to fish. Many newbies who end up here do so because they've meandered from one system to another, followed this "guru" or that "system" that promised all but delivered little in the long run. Lichello's theorem is to make money in the stock market automatically, no subscriptions or ongoing fees required. Learning AIM is a form of enlightenment, liberating the investor from the emotional roller-coaster of euphoria and panic, causing often the worst investing choices to be made. AIM acts as a neutral, mechanical system that responds only to the inputs and gives in return objective recommendations for emotion-free investing, something that evokes a WOW in many people who've otherwise been flying by the seat of their pants.
One may spend a lifetime improving AIM, if that's what one chooses to do, but my point is do you get so caught up in improving it that you don't really use it? Collectively I think this board has derived substantial improvements to the core system already: Vealies, split SAFE values, using the Iwave or Vwave to match a starting AIM account to the current level of risk in the market, as well as others.
Some how I can not explain this duality. . . contradiction?. . . that I sense on this forum. . . should it not be normal to spend a lot of time on improving AIM if that give a sense of doing a worthwhile thing? Rather, should it not be encouraged to squeeze more out of AIM or to make more AIM derivatives?
Build the better mousetrap and the people will come. I think there's a balance between implementation and pushing the envelope further. We must keep in mind that the range of people on this general board in particular are going to range from the newbies just finding out about AIM to those of us who are tinkerers and older hands at it who can keep pushing. For us to speak only of those things would be to lose the newbies as we'd be talking of issues that are the finer points of what we already (and therefore take for granted that the others reading our posts) already know. Think of talking algebra in an audience learning 2+2=4. Perhaps Tom needs to set up an "Advanced AIM development" board that could be dedicated to the purpose of further improving AIM and spinoffs. Such discussion is merited and does have it's place, certainly. The Holy Grail may yet come into view after all.
Best,
AIMster