Hi jibes,
My fault, I forgot to list a variable!
C=cash on hand (actually virtual cash in a LD-AIM system)
so the FC means "Safe percentage times cash on hand"
The formula itself may not make much sense since it is the final result of a full page of calculations that would take a long while for me to post.
I use limit orders, and both the limit price AND the size of the order are determined by formulas in my spreadsheet. For example, I actually filled an order to buy 26,000 of IBZT today at a limit of .034 (I got a slightly better fill actually). When I plugged this info into my IBZT LD-AIM spreadsheet, it immediately calculates what my new cash, stock value, portfolio control, SAFE, etc are. It also computes the new limit orders to place, which in this case were:
B 29,000 IBZT at .0321
Sl 9,000 IBZT at .0516
So I placed the new buy order and replaced my existing sell order with the new one. When the next buy or sell order fills I repeat the process.
I am finding that these positions are not generating multiple trades each day as I thought they might. Some basic "back of the envelope" probability would have helped me to see that in advance:
If I have 3 positions, each one of which has a history of 10 moves of 20% or greater in 3 months, and if I assume that each 20% move will generate a trade (which it won't necessarily) then what's my daily probability of a trade?
The probability of one position generating a trade in a given day is (10 moves in 3 months/60 trading days in 3 months)=1/6
So there is a 5/6 probability that a particular position will NOT generate a trade. Thus, the probability that NONE of the positions will generate a trade (union) is 5/6 x 5/6 x 5/6 which is 125/216.
The probability that a trade will take place in a given day is 1-(125/216) = 42% (a little less than a trade every two days).
Since this is based on some optimistic assumptions, I should actually expect the three positions to produce a trade about every 3 or 4 days I suppose.
So basically, my trading activity will not be as frequent as I first thought with this Micro-AIM experiment.
Cap
AI
