Hi Lou,
In principle, what you say about lowering the Resisances to increase the activity is true, but it may not necessarily be effective. If a stock cycles between +/- 10% and you schop up this 20% zone up into say 10 steps of 2% then you create say 10 buy activities down and approximately 10 steps up. These are very small moves and would only be effective if your trading cost are purely %-driven so that the frequent trading will not drive up the costs.
But there is a bigger problem with this. If you make 10 buy steps for the rather small 20% trading range then the cash is invested foolisly too soon. Although I agree that waiting for the bottom is not effective either, spending the cash too early for the sake of spendig it is not going to give much profit.
I have the same objection to the the Decay Method of spending the money(Spending progressively a percentage of the cash). This means that when you get to the bottom there is little or no cash left. So, this is the Dilemma for the two basic methods that I hear about:
1 Spending all the cash too early and have none at the bottom,
and
2 Spending most of the cash too early and having almost nothing left at the bottom.
Any method that allows you to spend the available cash mostly close the bottom is a gain over the two methods above.
In relation to any standard AIM you should also try to create a significant delay factor between the last buy on the dip and the first sell on the rebound. The longer this delay is the higher the profit will be. This is difficult to do with mutual funds that hardly move. Selling many small packages does not generate much cash! In this sense you are quite right that increasing the Sell Resistance is effective, but it also means that you should then increase the amount you sell at a later point in time if you want to generate cash for the next dip.
The central focus of my effort with the Vortex Method is to buy little as the stock begins to fall, and then increase the buy rate as the stock drops, and managing this so that at some reasonable drop-level most of the available cash is disbeursed. If the stock then keeps falling you simply wait and do nothing.
The point of all this is that to the exend that you will increase the buy rate as the stock goes down that the cash is invested more effectively than spending it too early. I have practished my method effectively. It is decribed in my Dutch Book The Vortex Method. I am working on an English translation, but this Board takes up so much of my time that the book translation takes a back seat...
Its called ineffective time management. One of these days you can buy the English version of the book.
Conrad
