OK Clive, I have the tendency to look into deep things, hoping to see something of value at the bottom.
Under AIM we can calculate the next buy and sell price levels given the Price, SAFE and minimum trade size values. There's a calculator for that purpose on one of Tom's web pages.
Well, Vortex (windows version ) does exactly that, using the threshold value (hold zone), and gives the trade advice for the number of units to buy at given buy/sell thresholds. What Vortex Windows does not bother about is to use a separate Min. Trade size. Any investor can decide for himself what the min. trade should be for a particular situation. Since Vortex Windows can not do back testing automatically this min. trade is not needed. In Vortex Excel a min. trade is used so that back testing can be done without using trades that are too small.
I would say that with any investment method one can make that type of calculation, based on whatever guidelines are used to generate a Trade Advice.. . .I did not recognize that issue of the skewed buy/sell for AIM by looking at these charts. I will try to understand it:
About the Charts:
As Vortex sets PC=SV then simply the arrows would be more central between the next buy and sell price levels in each and every case.
As a very crude example say that we start an AIM when the price is 100 and we calculate that the next buy and sell prices are 85 and 115 respectively. The arrow points to 100 and the vertical line spans the range from 85 to 115 (a range of 30 points). If then the stock price falls to 85 and we buy some stock then at that point the arrow points to 85. Calculating the next buy and sell price levels at that time will likely throw up a hold zone of something like 80, 109 (a range of 29). Such that the next buy price after that first buy is just 5 points away from the current 85 price level, whilst the next sell price is 24 points away.
Ahh, now I got it!
I conclude from this that the Hold Zone downward is now only about 6% and upwards 28%. . .I never interpreted the AIM Hold Zone that way.
With a constant Hold Zone of 15% is used I get this for Vortex:
85*(1+0,15) ~98 (13 point up)
85*(1-0,15) ~72 (13 point down)
For AIM this would mean and accelerated Buy on the Hold Zone alone, relative to Vortex waiting longer and buying more effectively than Vortex does (other things being equal).
AIM Buys at 80 and Vortex buys at 72
AIM Sells at 109 and Vortex Sells at 98
On the Sell side AIM would wait longer and Vortex would sell off earlier (other things being the same. . .(which of course they never are!).
This is indeed what I noticed on the AIM Buying in the Comparative Test we did.
Due to Vortex typically using different percentages for the buying and the selling holding zones this difference could in practice be more severe but also much less severe, depending on how the investor sets the Vortex parameters.
Apart from selling and buying at a different price for AIM and Vortex there is the difference in Trade Advice due to setting the PC in quite a different way than Vortex does. For the buying AIM increases the PC so that the (PC2-SV2)on the way down this increases the Advice amount to a much greater value than Vortex would, at the same price of 80, but this is offset by the fact that Vortex would wait for the price to drop to 72 and Aim uses a SAFE for damping the buying action.
All in all these different ways of calculating the trades makes AIM a rather aggressive Buyer on the way down relative to the conservative selling on the rise. . . For a 10% price rise AIM would not advice a ell with a SAFE of 10% while Vortex would sell at the 10% rise if a hold zone of 10% was used.
I can see clearly now that a Standard AIM is rather effective for strong dip buying and only slowly selling shares on the rise, in this way maximizing holding on to shares while the price is rising.. . .this would make Aim a Buy & Hold method. . .Hahahaha!
On the other hand if the selling-off is slow AIM does not build up the Reserve enough to buy many shares in the next dip, making it run out of cash easily when cash is needed.
This must be what Don Carlson used to call the high Cash Burn Rate for AIM.
It looks to me, from this analysis, that AIM starts out symmetrically for the first trades up or down and then for a cyclic behavior will be predisposed to hog the shares, rather than sell enough shares periodically to buy strongly in the next dip, meaning that if the dips are of the same depth as before there will not likely be enough cash to buy as aggressively as in the first dip.
I think I now know a little about how AIM works.
Thanks Clive, for lifting the veils off my eyes.
Regards,
AI
