Here is the corrected text of the post I withdrew:
Among other things I have been attending to lately, I have been struggling to get Windows 7 functioning properly. . .No success yet. Some errors prevent me to download some drivers(scanning and sound and Printing) frown
Also O have an Error that causes the MS Back-up not to work frown. . .I have been ”suffering” this for 1,5 months now.
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All the time I have continued running some 3 Demo's on the SP500 SPY, and on a set of Dutch Penny. . . a Calamity portfolio. . .just for Fun, since 03-01-2011 foe SPY to today, with VORTEX, trying to get an optimized strategy using our Optimization Program. . .(only Dutch language so far). People interested could buy a Copy of it for € 100 and experience the development as we go, getting free Updates.
SPY has not show a great deal of volatility and has been steadily rising in value these 3.5 years. . .resulting in the performance for which Buy & Hold Method would have been better, if I had used the simple ROI Yield Calculation. . .as some of you use: The ROI Method without considering a variable amount of Investment that over the years applies.
My approach was as follows, as of 03-01-2011 with $ 20000 Inlay:
Parameters are
* Cash Fraction = 0,72
* Buy Threshold = 7%
* Sell Threshold = 7%
* Buy Aggression = 0,8
* Sell Aggression = 0,6 . . .This means that I buy more aggressively than I sell, which drives the Portfolio towards Share Accumulation (Increasing Equity Value).
If I reverse the Aggression Factors then that drives the Portfolio towards Liquidation (This interesting if it is to generate cash income).
1) January 2011 I started with Parameters more or less as I had found best the previous periods with a volatile SPY. As the time goes on. . .during say 6 months or so I monitor the volatility and if it proves to be too low I lower the Buy-Sell Thresholds a bit and at 6 months or so I run an optimization with VOP. . .Vortex Optimization Program . . . on the last 6 months history and then I resets the Vortex parameters for optimized Yield %.
The Cash Fraction can then be rebalanced to suit, if judged necessary. I use my "fingerspietzinggeful" for that smile.
The Vortex Program also allows for adding Cash at any time and adjusts the total investment to an Period Average that as the Investment for the period. The Optimization Process uses a fixed CER that is started with for that Run.
2) After this a new Staring condition is defined for VOP. . . Essentially the Test Portfolio is Reset to a New Start Condition for the Next Optimization Run. The Vortex Portfolio itself runs from the Starting Date. Trading costs and Interest on Cash are accounted for in Vortex but also in the VOP. . . This prevents the yield to be suppressed by too frequent trading!
Starting Price = $ 127,05
3) Results after almost 1,5 year:
At the start volatility was much lower than expected and was adjusted somewhere during the period manually to
Buy = 3 %
Sell = 4%. . .Aggressions unchanged.
The subsequent VOP Runs showed it should have been around 5%. . .I had a snappy Trigger Finger J
Share Price = $ 137,4
Share Price Gain = 9,91% but for the ~1,5 year that is 6 annually.
Vortex ROTAC Yield = 6,68% Annually
This is based on Total Averaged Cash Inlay. . .which remains in this case at $ 20000, but If I had added $ 10000 at the 1-year point the capital base would be $ 30000 but for the yield calculation @ 61,5 year it would be [20000*1 + 10000*0,5]/1,5 = $25000/1,5 = $ 16667 for the 1,5-year average. In this case ANY cash injection is treated as an Cash Inlay and any withdrawal is treated as a Negative Inlay. I prefer this way as it models The real World Investment Environment.
Vortex ROTAI Yield = 14,01 % Annually
This is based on only The Money for which shares are bought and expenses required to maintain the investment. If shares are sold the investment base gets smaller. If cash is added or taken out NOTHING changes except the Yield on the Cash gets higher or lower.
The Cash in itself is NOT at RISK an is not treated as an investment for Equity. Obviously this method. . . .very similar to the ROCAR that some AIMers use but it is more realistic and is automatically calculated for the Portfolio.
Interesting to note that the trading cost in the first 1,5 years have NOT reduced the Buy & Hold Yield compared to the ROI Method but in spite of the trading costs the performance was 4% higher even with the low SPY volatility [In this example I had a constant € 20000 Cash Inlay]. Any AIM-trader would have had pay the same trading fees as the Vortex AIMer, so a regular AIMer might have had a higher yield for the same type of trading but the yield would have been overstated. Moreover, the high Vortex trading aggressions of 0,8 and 0,6 are considerably higher than for a standard Lichello AIM. It is therefore safe to state that a standard AIM for SPY between 03-01-2012 and 03-07-2012 would have had a much lower yield than the 6,68 % Annually that Vortex AIM scored. Does anyone that aimed SPY in that 1,5 year period still have any yield data thereof?
With the 14% ROTAI Yield that really shows that the Vortex AIM Method created an hypothetical Yield Improvement, due to intermediate trading on price changes. . .in spite of the trading costs incurred. . .by using this fundamental AIM Principal of
Buy Low Sell High
Again and again when prices fluctuate.
The end Position of the Spy Portfolio is at 03-07-2012 is:
Cash Reserve = $ 14093
Equity Value = $ 7941
Portfoli Value = $ 22034
Interest earned = $ 411
Trading cost = $ 120
Dividend paid = $ 227
[The dividend is, in this case, calculated in as Gain but it was not yet included here as intermediately added capital. . .Using the ROTAC method this could be treated as capital added. If you receive Cash dividend on your bank account it becomes a choice to add it to the Reserve if the Portfolio or not smile In this case it was added ro the Reserve but NOT treated as an extra Capital Injection but under the ROTAC Principle it could have been].
Of course, experienced AIMers know al these aspects already and accept the risk of Under-performance and AIM for the likely Gain of Over-performance, relative to the Buy & Hold Method.
I made a point of it here for Newcomers to AIMing that might find the Vortex Method an interesting alternative Automatic Investment Program that has an extensive Portfolio Administration Section, for managing their investment.
More results from between June 2012 to May 10, 2014, in the next posting.
