A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi Adam, I don't feel the Portfolio Control increase with buying is a problem. AIM rewards the user for "good behavior" of buying low by letting the risk envelope increase a small amount. Without the PC addition, it becomes yet another scale trading variant.

The main function of AIM's activity is quite similar to industrial controls. The set point (Portfolio Control) is the center around which all adjustments are made. Proportional controllers usually have bands similar to our Lichello bands beyond which the controller acts to recenter the activity. The "rate" and "reset" functions give the frequency of review and speed of adjustment. Again this is quite similar to the way AIM functions.

If we review too often with the normal positive feedback to PC, then the cash can be depleted too quickly. However, if we stage the buying over some basic time interval, just like the industrial proportional controllers, then cash can only be depleted after X number of reviews have taken place.

Anyone who reviews the 18 years of Bull market trying AIM without the PC adjustment will find rather sad performance. Mr. Lichello seemed to understand that, for the most part, markets tend to go upward over time. There needed to be a bias for this trend built into AIM to help it along. The closed loop feedback to PC was a clever answer and one that I wouldn't have considered knowing what I do about industrial controls. What works with investing doesn't work with industrial controls. That same feedback would create instability.

Best regards, Tom