Systematic Investing Group

[lostcowboy]

Hi Aim hier, I hate doing this to you, as I think you are one of the better thinkers around!
From your comments I feel that you have not been keeping up with the discussion on hi low investor!
From the start I have always said that determining the correct high low points would be a challenge. Part of the problem is that the correct points do not stay the same, they move over time. It is true I have not put much effort into that area of investing. There are many ways to try and determine the correct high low points. One could use past price history, this may work for short term investing. Myst has suggested using price channels to determine the high/low points.
Other investors feel that trying to use past price history is worthless, and you should use fundamental data about the company to determine if a company is selling at a good price now. They seem to forget that the fundamental data that they are using is in the past and is likely to have no bearing on how the company does in the future. But that is another story.
Myself, I am leaning toward the NAIC's method of determining the high and low prices.
other investors feel that supply and demand of a company's stock shares is the most important thing.
However you invest, you come up with two numbers, a high price where you want to sell out of a stock, and a low price where you are willing to invest (all the cash that is allotted to that stock) in the stock. If the price goes below that number you will want to get out of the stock, as it is no longer behaving the way you feel it should. As time goes on you will form new high low prices to use. If the stock is between your hi/ low prices you should be invested in it to some degree.

You said, You need to pick stocks of companies that are operating successfully and will continue to do so in the future. If that is the case, why sell all your shares at any point. Keep a core position and trade around it. That is the approach of AIM. But all of the systems depend upon you not choosing stocks of companies that are destined for bankruptcy.
Have you downloaded the hilowinvestordemo spreadsheet and played with it, or are you making comments on how you think the spreadsheet works!

Lets talk about formula plans. one of the oldest plans is the constant ratio plan. you split your money between stocks and bonds, and every so often you check on it, if it has become unbalanced by a great enough amount you re-balance it to the original ratio. This works great for preserving capital, A lot of the institutions have used it in the past. But it leaves a lot of potential profits on the table. So they came up with variable ratio plans, some plans were very simple some are complex, some are for stocks, and some are for indexes. Most use a central point where the ratio is 50/50, a lot of these fail due to not being able to move the central point. One of the variable ratio plan is called the Constant dollar plan. You pick a dollar value that you want to have invested in stocks, and as stocks values go up and down you buy and sell shares. It has two problems with it. Each time it comes back to the central point you find that the ratio has shifted some, over time you find that more and more of the portfolios value is shifted to the cash side. The other problem is there is no easy way to shift the central point.
AIM is a variable ratio plan that is based on the constant dollar plan. It corrects the problem of the ratio shifting when you get back to the central point, and as long as the central point does not shift to much, it can adjust for that to but it adjusts slowly. If the central point moves to far AIM can and will break down! That is why Tom has come up with all his rules for Veale's and reverse Veale's. Also AIM does not adjust well to adding or removing money from the plan well, there are a lot of rules for that also!

Don's Husky and LD AIM, both to my understanding use virtual dollars. While I guess there is nothing wrong in using virtual dollars in a formula, I would rather use the real dollars.

Myst's X-Dev, while Myst will disagree with me I still view it as being more for short term trading. Yes it does have its three day rule for getting back in, or out of a trade.

Incwave's system, is based on the constant dollar plan. and the William %R formula, they realized that a lot of the cash in a constant dollar plan is not used, they realized if they could determine the high and low points of the stock they could use the cash better. A problem I see with Incwave is that their stock limit does not increase automatically ( you can increase it manually), If you do not increase it at the right rate you could lose a lot of potential profits, if you increase it at the wrong time, you may not have enough cash on hand to meet the requests. I made a spreadsheet to correct these problems. I did not release this spreadsheet to the general public, I did send it to Incwave, if they want to use it in their program they can. The other problem is that with incwave you have to pay monthly to use their system. Which makes it out of range for most investors. I don't know how incwave derives their high low prices, other than they say they change after the company SEC reports come out. Incwave vary's the stock position from 0% to 100% of the stock limit. As you pointed out sometimes the high/ low prices may be off some. High low investor tries to correct for this, while it can go between 0% and 100%, I feel it is better to go between 10% and 90%, or 20% and 80%, or what ever. I also decided not to use a stock limit, I think it is better to use the total portfolio value.
Nuff said!