Hi all
I just wanted add a comment on my previous "Off the Cuff" conclusion with repect to the {pc-y*(s+1)} and (pc-y)*S.
I only quickly compared the two functions for a set of identical (pc-y) values. I did not consider the efffect in an actual AIM costruction. For a real test one would need to consider the fact that the pc values are set differently. So the conclusions I made may not be the same in actual use. In order to test these I have to set up set up an Lichello AIM nect to my Vortex AIM.
For now I can only say that if I understand the use of the {pc-y*(s+1)} correctly...decreasing the Buy Advice pc-y)...then my conclusion would be correct if the Buy Advive is the same for both systems. In order test this one needs to make several choices: Do we trigger trades at the same Advice or at the same Vaue Drop or the same %-Value Drop?
Example with equal percentage drop 20% for each Buy Trigger
(Using pencil & Paper):
Lichello Safe =0,1 Vortex
pc= 1000 y=1000 pc= 1000 y= 1000 F=1/(1-f)
y2=800 y2=800
Del= 200=Advice Del=200
Buy=1000-800*(0,1+1)
Buy=1000-880=120 Buy=120=F*(1000-800)-->F=0,6-->f=-2/3
y3=800+120=20 y3=800+120=920
pc2=1000+1/2(120) pc2=pc1-2/3(120)=1000-80=920
pc2=1060 pc2=y3 Always !!
It is now obvios that from here on the buys will diverge:
Price Drop 20% At 920 At 920
y2=736 y2=736
Del=184 Del=184
Buy=1060-810=250 Buy=0,6*184=110
y3=736+250=986 y3=736+110=846
pc2=1060+1/2(250) pc2=y3
pc2=1185 pc2=846
Price drop 20% @ 986 @ 846
y2=789...Del=199 y2=677...Del=169
Buy=1185-868=317 Buy=0,6*169=101
y3=1106 pc2= 1344 y3=947 pc2= 947
Fronm this, with a Trigger at 20% price drop,it can be seen that the acquisition rate of the Lichello AIM is much greater than the Vortex AIM, relative to an identical start-out rate
@ the first Buy on the Buy Resistance of 20% . Using an earlier Starting point @ a Buy Resistance of 10% gives similar effects(In this example the SAFE and the Buy Rsistance are not identical)
It would of course be possible to Trigger the Buys at an equal Buy Advice and then the effect will be as discussed earlier. It is obviously also that the Price Drop % Trigger can be identical to the SAFE %
From this atleast Three important conclusions can be made:
1 The Vortex AIM dispenses, at these settings, cash slower, allowing more cash to be spend at lower prices...if the price drops continue to that low level that all cash is used up.
2 The Lichello AIM dispenses more cash early on, and this would be more effective if the price drop reverses early.
3 If the Trigger for these settings would be lowered, for example from 20% to 10% then the Vortex AIM would spend cash more aggressively than the Lichello AIM. This would make the Vortex AIM more effective at low volatility(If the Buy Trigger is lowerd from the reference point at which the Buys are equal). As a matter of fact, using Buy=pc-y(s+1) in the Lichello AIM would generate a Sell Advice as the value of y*(1+s) will become larger than pc.
This does in no way prove that the Vortex AIM is any better than the Lichello AIM because the parameter setting for Deep Dives is not effective for Shallow Dives...
The general conclusion is that for effective performance the parameter settings will need to be adjusted to the type of stock, and these settings will be quite different for the the Lichello and Vortex AIMs. If the one system will outperform the other will entirely depend on the ability of the Operator to select the best parameters for the type of stock he is investing in.
Comparing Apples with organges remains difficult.
Regards,
Conrad
Hoee
AI
