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I'm using Fidelity Active Trader Pro but it's pretty buggy sometimes. BrownCo.com seems to be on top of their game as far as dealing with complex trades, so maybe they have a good system. Might try checking that out. Cybertrader is another possibility but I haven't demo'd their stuff.
By the way, as a housekeeping measure:
I think if there are discussions about AIM that use formulas and such, that it is important for the poster to DEFINE what the variables in the formulas mean at the beginning of the post, for example:
P=Portfoli Control
V=Stock Value
S=SAFE (percentage of V)
B=Buy Order
M=Minimum order size (percentage of V)
etc.
I have noticed some confusion in past posts that resulted not from the logic of the arguments, but simply from ambiguity in the notation.
This also may help those who want to follow discussion like this but give up because they came in on the middle of a conversation and can't determine what the poster is talking about.
I think I'll go have some more coffee >>> c\_/ now. :)
Hi Conrad,
I think we have succeeded in confusing each other and those around us! :-P
You said:
"You have used the substitution
V=S*PC"
1. I didn't use that, lol! YOU used it in your post back in January. I just copied it into my last post because that's the step that confused me in the first place. Now we both agree that
V=S*PC
is not correct and that the correct substitution is
V=(1-S)*PC.
Whew! OK :)
2. It was in fact your original use of V=S*PC that led to your "January Equation" of "-1+S+S^2=0" that led to the numbers 0.618 and 1.618. However, since that substition in January wasn't correct, I also agree that these Fibonacci numbers DO NOT crop up in the equations.
3. My apologies for not checking first with you why you used V=S*PC back in January. If I had asked you first (instead of getting all excited about the cosmic significance of your result in that post), we both would have realized that the result was wrong and avoided confusion.
At any rate, I think we should clarify what we are talking about. If I understand it, you were trying to explore what happens if you vary the SAFE parameter. In other words, if the SAFE value is varied, then at what stock value will the first trade happen, and how large will it be? This is already two questions to explore, and you have just brought up the question of what happens to subsequent trades as well.
In January you seemed to think that AIM may become unstable and chaotic as SAFE increases past a certain point, but that conclusion was based on that "V=S*PC" substitution that you used. We now both agree that that step was erroneous.
SO: What are we trying to determine? Are we still trying to figure out if AIM becomes unstable for certain values of SAFE? Or are we just looking at what happens to consecutive trades T1, T2, T3, as a result of varying SAFE?
I am in favor of starting from SCRATCH, and exploring the basic math behind BTB AIM and the effect of SAFE and minimum order size on trades. I would be happy to start this discussion off in a future post if you think it's valuable.
It may help others on the board get a handle on what we're going on about as well! :-P
Hi Steve and thanks for the welcome! :)
Conrad,
LOL, that was why I referenced your original post. It was from back in January so I didn't think you would remember the details. Anyway, here is the meat of it:
As S rises both the Holding Zone increases and the Advice Discount increases. This results in an odd thing:
For S=0,5 the stock value must drop by 50% and this gives
Buy Criteria = 50 % price drop
Buy Order(at 50% drop)=PC-(PC/2)(1,5)= PC(1-3/4)=0,5PC
For S= 0,6 we get
Buy Order = PC-(0,6PC)(1,6)= PC(1-0,96)=0,04PC; Buy Order is almost zero!
As you can see, the Buy Order becomes small again and the tendency that is developing is that as the S becomes larger the Buy Order becomes zero, again:
Find that point:
PC-V(1+S)=0 ; PC=V(1+S) ; Set V= S*PC
PC=S*PC + S^2*PC
0=-1+S+S^2
S1=0,618
S2= -1,618
For some reason which I didn't quite understand at the time, you set V = S*PC, or in other words, the stock value would be equal to the SAFE times the Portfolio Control.
I think this may have been an error, and what you were trying to express was that "if the SAFE is 40% (for instance) then there won't be a buy until the stock value is down by 40%"
The actual expression of this would be that the "buy condition" is V = (1-S)*PC, not your condition that V = S*PC.
I'm not trying to pick on your math!! :) I'm just trying to explore the ODD THING that you discovered, and trying to make sure I understood what you were saying in your post.
You say:
Buy Criteria = 50 % price drop
Buy Order(at 50% drop)=PC-(PC/2)(1,5)= PC(1-3/4)=0,5PC
For S= 0,6 we get
Buy Order = PC-(0,6PC)(1,6)= PC(1-0,96)=0,04PC; Buy Order is almost zero!
I think for the S=0.6 case, you wanted to assume that the stock value had to drop by 60% (to 40% of the PC) so your Buy Order forumula should have been:
Buy Order = PC-(0.4PC)(1.6) = PC(1-.64)=0.36PC
Or am I totally confused as to what you intended to express here?
In any event, the 0.618 and -1.618 numbers that you found are the result of your conclusion that 0=-1+S+S^2 and this IS the formula that has as it's roots the Fibonacci numbers 0.618 and -1.618.
However, if the correction that I made above is right, then that final conclusion is different. It is:
PC-V(1+S)=0 ; PC=V(1+S) ; Set V= (1-S)*PC
PC=(1-S)*PC*(1+S)=(1-S^2)*PC
1=(1-S^2)
S=0
Ummm, hmmm. Tell you what. I'll get back to this after I mess around with it on a spreadsheet. :-P
DBBD Same here, in at .415. Last earnings report nice to see. May make this a longer term play.
GOAM: yep, I was stopped out at the LOD. I feel silly.
GOAM: Stopped out at .51
Should have known better than to put a stop ABOVE a resistance band.... I think I need more coffee! :-P
BTW I'm new and will not post frequently for a while; this is a great board!
Conrad,
I wanted to comment on an old post of yours from earlier this year, because I think you found something quite interesting here.
For large values of the Buy Safe you get(theoretically) a wildly reacting AIM that goes out of control. Maybe that also happens to a lesser extend, with a Buy SAFE of 0,4 or so.
This analysis shows that AIM is well behaved for small SAFES but goes unstable for S=0,618 and as S rises to greater than 0,618 the Buy order approaches zero again and AIM becomes dormant:
1. The number .618 as you may have noticed is a Fibonacci number. This is the value that has the property that
1/x = 1+x
and this equation, (as you noted) has as one of it's roots the value of approximately 0.618.
For those who aren't familiar with this, this is a Fibonnacci number because the Fibonnacci series
1,1,2,3,5,8,13,21,34... (each term is the sum of the preceeding two)
has the property that if you divide any of its terms by the next term in the series, the value approaches 0.618. Conversely, if you divide any term by the previous one, the value approaches 1.618. I believe this number was known to the ancient Greeks as the "Golden Ratio".
2. You noticed that AIM becomes unstable when you adjust the parameter for "SAFE" to a value of 0.618 or larger. I have an idea (untested) about why this is so.
AIM is what is known in chaos theory as an iterative function; in other words, a function where you plug in a seed value, then take the result of the function and plug it back into the function itself, over and over. Without going into a detailed history of chaos theory, it was discovered that by varying certain parameters of functions like this (for example the value of SAFE), there was a certain threshold above which the parameter would cause each successive value of the function to fluctuate wildly in a chaotic manner, even though the function itself may be very simple (as the rules of AIM are very simple).
3. It may very well be that the Fibonnacci number 0.618 is just such a "chaos threshold" value for the AIM function.
4. I have NO IDEA what any of us can do with this idea in regards to using AIM, but since I can finally post more messages now :-P I thought I'd bring it up as a subject of academic interest.
Thanks Tom! I'll take a look through those, as there seems to be quite a bit of stock selection advice there.
Hello AIMers!
Started a position last week with PWER (Power-One, Inc.) because of the volatility and low 20-day W%R.
50/50 Starting Allocation (SV=300@8.26 = $2478, Cash=$2522)
Safe set at 5% of PV (Matt's Mod)
Tracking with Excel Spreadsheet
Using Limit, GTC orders at edge of hold zone
Buy 50 @ 6.45, Sell 31 @ 10.26
I set the cash allocation so high because I'm not thrilled with the fundamentals of the stock. In the future I plan on using stocks screened with some of William Oneil's CANSLIM criteria with an eye toward those with the highest price swings.
This is kind of a "getting the feet wet" position, and I hope I can AIM it for the long term without having to dig into it for personal cash flow reasons.
Hmm, and apparently I'm still limited to 3 posts per day so far. :-P
Scott
hk2, thanks for your response!
I figured out what happened: I had been getting Norton anti-virus notifications of trojan-style attacks, so I had blocked several IP address ranges. One of those ranges must have included the Stockcharts.com address. When I removed the blocks I was able to get in with no problem.
I added this board to my favorites, so hopefully next time I'll have something more intelligent to post! :-P
Thanks again!
Hi Adam,
That seems to be one of the perennial questions when it comes to AIM. I think this is because many short-term traders discover AIM and basically say "wow, what a cool system, but sheesh... once a month???? Heck no, I can do better than that!" Then the tweaking begins.
The short answer to your question is YES, IMO AIM can be modified to get more action, but only to a point because this is not what Mr. Lichello had in mind when he developed AIM.
Many of the posts you see on this board regarding optimization of SAFE values, changes to update frequency, use of limit orders etc. are attempts to either soup up the action or reduce the risk levels. I have found some of these ideas to be valuable, and I'm just as fond of fiddling with AIM as the next guy.
I look at AIM as just one of a broader set of trading & investment tools though. This set consists of economic analysis, overall market sentiment analysis, fundamental analysis, technical analysis, use of different trading time frames, money management and risk control. For myself, I classify AIM more as a hybrid between a long-term investment approach and a money management/risk control tool, not as a trading system.
I mention this because from that perspective, if I wanted to get more action, I would probably not try to get it by using some variant on AIM. I would do it by allocating a certain portion of my investable funds to some other short-term trading system. To connect the two, I might for example use what I considered to be excess cash being thrown off from an AIM position to fund a daytrading effort or something like that.
Hope this helps!
Hmmm, and this is my last post before I get my new IH registration approved, so this is me being silent until sometime tomorrow.... :)
Help!
Hello all... I am a frequent reader of one of the other boards on IH, but I just noticed today that this board was here. I haven't taken the time to review the history of this board in great detail, so I apologize if this is an incredibly stupid question but here goes...
Where is StockCharts.com?????? It has been one of my favorite charting sites on the net for almost 2 years, but now I can't seem to get in at all. I keep getting the "site not available" message on my browser. I first noticed this over a week ago. Any short reply would be greatly appreciated. Thanks!!
Hello AIMers!!
I am familiar with AIM from way back in the 80's when I first discovered Lichello's book, so I just wanted to say hi to Tom and all! I'm kind of a "turbo-lurker" I guess since I have actually spent the last few days skimming through the 10,000+ posts in the history of this board (I feel as if I know many of you already! )
I have been extremely impressed at the level of knowledge, creativity, and professionalism that I have seen so far on this board!! It's great to see. :)
Since I have been reading many of your posts, it's only fair that I tell you a little about me (at the risk of putting everyone to sleep..)
My job as a broker & trainer for the traders at one of the largest mutual fund companies in the world who's name starts with an "F" and ends with a "Y" :-P was recently eliminated, so I've had a lot of time to spend in unemployment-land on things related to my interests (one of which has always been an investigation into the mathematics of AIM). As an unquenchable math buff, that's one of the things that attracted me to this board, so kudo's to Conrad (who at times can even make MY head spin) and all the rest of the searchers and tweakers out there!
I am a short term trader by nature, and have spent the majority of the past couple of years trading index options on the OEX with limited success. This is partly due to the "hmmmm... I just thought of a totally DIFFERENT and BETTER way to do this" factor I suppose, but I enjoy the journey on the road to knowledge more than enough to justify the cost. Unfortunately, my situation has cost me my ability to continue with options trading, and thus my renewed interest in the use of AIM (at least as a concept of money management in my overall trading toolbox).
I have taken a few notes on some of the many interesting and useful ideas discussed here so far, and in future posts I hope to explore a few of those with the rest of you. And who knows...I may be up for a little "millenium grubbing" from time to time as well! :-P
regards,
Scott