A.I.M. Users Bulletin Board

[ls7550]

There are four primary sources of investment benefits

a) income - dividend yield/cash interest

b) price appreciation

c) volatility

d) cost-averaging

Results from the investment system model and parameters chosen will simply reflect the ratio of allocations between each of (a) through (d) in relation to how the stock price moves over the time period.

As in portfolio diversification you need to periodically review the balance of each of (a) through (d) to ensure you haven't become too heavily over-weighted in any one and too underweight in others.

Pushing or reducing any of (a) through (d) is akin to holding a diverse range of stock but then going over or under weight in a particular sector or stock. Tweaking in line with expectations and predictions may or may not work out depending upon how the future actually unravels with respect to those predictions.

The results you achieve even when comparing two exact same machines (methods) with the exact same settings/parameters will potentially significantly differ given even just a minimal change in starting price value. The same applies for even just small differences between parameters/settings.

I'm for one am not at all surprised with Conrad's AIM vs Vortext 'apples/oranges' finding.

The human mind seeks patterns in everything, and which is a recognised cause towards investment under-performance as a consequence of going more overweight in areas based on recent historical patterns (buying high, selling low). For example pushing volatility capture based on recent zigzag motions is potentially not a good idea as you're structuring your forward blend of (a) through (d) based on a historical stock price waveform that will unlikely be reflected in the forward direction.

If I understand correctly Vortex is similar to AIM but uses a slightly different method of Portfolio Control updates after each trade and has separate buy and sell aggression factors, which scales up or down trades sizes according to recent events (predictions). Which is somewhat similar to how LD-AIM scales trade sizes but not in such a dynamic manner. Similarly using a sell aggression value that produces a zero trade size is akin to pulling a Vealie.

The bottom line I think is that AIM and Vortex are generally based on the same model of capturing (a) through (d) type benefits, such that coupled with additional features (LD-AIM scaling, Vealies, Aggression factors etc.) can be tuned according to predictions. Whether those tweaks/tunings produce better results than fixed classic settings however is a bit of a 50/50 game according to how well your predictions match the actuals.

In concept LD-AIM could be refined to reflect Vortex by using something like a dynamic scaling factor. So maybe rather than using a fixed LD scale size factor of say 2 instead use a dynamic scaling that perhaps reflects what the vWave currently indicates

Using something like Buy Scale Factor = 1 / vWave, and Sell Scale Factor = 1 / ( 1 - vWave ) so when vWave was low, say 0.3 (30%) then you'd buy more/sell less than for when vWave was high. And when vWave was high then you'd sell more/buy less than for when vWave was low.

Overall however I suspect that if applied to all possible combinations of future price waveforms that the conventional versus classic styles would equally compare, such that the additional criteria just adds unnecessary additional levels of complexity.

Clive.