A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi ND,

1) "Default: Buy Safe 10% - Sell Safe 10% - Minimum order size 5%.
Changed: Buy Safe 20% - Sell Safe 0% - Minimum order size 5%. To Preserve Cash in a Down Trend."

This will give the AIM engine a bias to distribute shares. Think of SAFE as "Resistance." All the resistance is on the Buy side in this example. The overall Hold Zone will be of the same magnitude, but just shifted downward. The first minimum sale will come with an increase in value of about 5% above Portfolio Control.

2) Conserve Cash with Buy SAFE increases on sequential Buys......................................
Let's assume the Buy SAFE is 10% as of the last AIM directed sale. When we see the first Buy target Price reached and make a buy, we would then increase the Buy SAFE to 15%. With each sequential buy we would repeat this. The practice acts to discount the "next buy" target price a small amount, which should act to conserve cash a bit longer in a prolonged price down-turn.

No change in procedure is done with adding to the Portfolio Control with this. It's still going to increase the Portfolio Control by 1/2 of the value of the most recent purchase.

3) I've never attempted a test while using an increase to the Buy SAFE of 10%. My guess is it would create a larger discount to the next AIM Buy target price and therefore would help to conserve cash.

4) Minimum Order Size determination.......................
In general, I use a 5% minimum order size with diversified holdings like Mutual Funds and Exchange Traded Funds. These investment vehicles tend to not have as large an "amplitude" in price change. So, to increase the potential for more "Round Trip" trades (buy to a sell and sell to a buy), I keep the order size relatively small.

I generally use 10% minimum order size with individual company stocks. They have greater frequency and amplitude of price change and reversal, so we can still get reasonably frequent trades, but of larger size and profit per trade. I also use 10% minimum trade size on many of my "income" related investments. If they are paying a high dividend, I don't want to be selling off shares unless the trade makes a bit more profit per trade. Also, with income related investments, frequency of trade "Round Trips" is low. With income investments, the emphasis is on collecting dividends more than on growth or AIM trading.

5) SAFE total creates the majority of the Hold Zone size. Trade size as a percentage adds to that Hold Zone size. For "Old School" AIM that would mean 10% Buy SAFE, 10% Sell SAFE for a basic hold zone of ~20%. If we then add 5% as a minimum order we then have the basic Hold Zone plus 10% for a total of ~30% (5% on the Buy side and 5% on the Sell side). So, from a buy to a sell it will require roughly a 30% increase in price/share to reach that new Sell target.

The same is true of a 10% minimum order size. It adds roughly 20% on top of the total of the Buy and Sell SAFE. That would mean roughly a 40% price rise necessary to get from the last buy to the next sell target.

6) We can approximate an ideal SAFE and Minimum Order Size by looking at price history and guessing at how many "round trip" trades there would be with different settings. Ideally we want the largest round trip profit with the most number of total round trips over time. We could set the minimum order size at 1%, for instance and maybe we would increase the number of 1% size trades. However, the total range from a buy to a sell would also be smaller. That means less total profit per round trip. We want to maximize the number of Round Trips at the best possible Round Trip Profit.

7) It is my habit to base the minimum order size on a percent of Portfolio Control. This is different from Old School AIM. Mr. Lichello used an order size based upon the value of the holding, not the current Portfolio Control. Using a percentage of PC as the basis for the order size gives some symmetry to the buy and sell order sizes. It makes one's next buy orders the same value as one's next sell orders.

By using Portfolio Control as the basis for the minimum order size, we automatically increase the minimum order size over time. Each buy raises the Portfolio Control, and so a percentage of the PC, it gives us a larger minimum order.

Welcome to the AIM board. I hope this helps to answer some of your questions. Please feel free to ask more or comment on this response. There are others here who will also be happy to help out.

Best wishes,
OAG Tom