A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi ZG, Re: Split SAFE possibilities.......

Looking at StockCharts' view of ASG and using their Zig-Zag line to plot reversals can help find an historical sweet spot for the size of the total SAFE (Buy + Sell SAFE). I first look at the number of reversals at various Zig-Zag values and then decide on a total SAFE amount. The idea is to maximize the opportunities for AIM trading while keeping a high LIFO gain with each round trip. If you have just 2 trade opportunities in three years, for instance, with a total SAFE of 40, but you have 5 trade opportunities with a total SAFE of 30, AIM will do more trading for reasonable LIFO gains with the lower setting.

Here's ASG examples with different Zig-Zag levels:

40% Zig-Zag reversals (approximately equal to 40% total SAFE)
https://schrts.co/gqPzTsRF

Here's the same but with 30% ZZ:
https://schrts.co/PhidsgHZ

and once more at 20%, just for fun:
https://schrts.co/sfapdTyi

Note that as the size of the Zig Zag percentage drops the number of 'round trips' goes up. It's not linear and one can get a feel for what might be an optimum total SAFE might be. Generally, we're looking to maximize the number or round trips at a LIFO that gives the best overall return on volatility capture. We can set total SAFE too low and get a lot of round trips but at ever decreasing LIFO gains. If the LIFO shrinks more than the number of or round trips increases, you've passed the optimum point.

In general, I usually look at the Williams%R levels as AIM tends to trade beyond its extremes of -20 and -80. If our ZigZag peaks and valleys coincide with the W%R peaks and valleys that's usually close to optimum. In ASG's quick view, it would appear that a total SAFE of 30% would satisfy goals of reasonable LIFO and frequency of round trips. (just for fun, change the ZigZag to 25 and see what happens)

Next is to then divide the SAFE into Buy and Sell SAFE for your own comfort. If total SAFE is 30%, you could divide it into 10% Buy and 20% Sell if you would like to bias AIM toward accumulation. Reverse those settings and it will help conserve cash. Those decisions will depend upon how healthy your cash reserve is when you start. If you were starting with zero cash, you could even put all the SAFE on the Buy side and zero on the Sell side. That would put AIM in the 'distribution' mode of selling but conserving cash for deep bear markets.

Once a general total SAFE range is determined it's best to leave things alone going forward. AIM will do a good job thereafter. Changing the Split SAFE bias after the initial settings can be self defeating as those decisions might come along with emotional views of the market's future. So, Set and Forget seems to be the best thing.

Hope this helps,
OAG Tom