A.I.M. Users Bulletin Board

[Conrad]

Hi Clive, you don't need to be sorry

So what you are saying is you will see what the market just did AND THEN pick the method that would have worked best. 20-20 hindsight ... I just love it! Let me know when the program is finished!

As far as programming my idea's are concerned, that is a problem. I am not a professional programmer, I am having enough trouble with Excel as it is to get the simple things done(if that was not already quite clear)!

The fact that you "love" my idea at least appears to mean you are not trashing it but it is not exactly what I meant. It is not so much looking back what happened in the past but rather what prices are doing "at the moment". Of course that means that means looking back a bit is part of the game AND taking account of the economic situation of the day. That is already being done by any sensible investor. . .I would say 80% of the discussion here deal with these things. If a stock price is seriously deep-diving even skilled AIMers will sit up and notice and will know that something different needs to be done instead of simply to keep buying.

I am thinking more from the point of view of industrial control theory. With investing instead of stabilizing the output one wants, of course, to optimise the output in a positive sense. . .maximization of profit(positive feedback for Profit >0 )

My previous idea was using back testing and frequently updating the historical data set with "every day" adjustment. . . for each new data point you add, you drop the oldest price from the set and run the optimisation subroutine so that you get new trading parameters. One could even use an exponential modifier to give recent data more weight than old data. (In Vortex Cash Limiter I use 6 parameters, so optimisation would be very time consuming!) and then the next trade is calculated using the updated algorithm.

This basic idea is of course nothing new. In control theory this sort of thing is called "adaptive control". In such a system they use dynamic curve fitting and the process control system is optimised ast it goes automatically.

That is what I had in mind but the difficulty of programming it is the “Bridge too Far”. . .for me.

If I would be using a progressive ladder and the trading range narrows this scheme would still trade effectively. . .larger trades near the up/down limits! Clearly, if then a sudden large price change occurs one must rethink the scheme.

I constantly have to emphasise that my scheme is not meant for use as a Trading Robot. . . if the investor sees that the price jumps out of the trading channel he needs to either change the trading amount to outside of the given "advice" or stop trading or bail out.

In my Vortex AIM I have an automatic Reset: After every trade I restart the portfolio in "initial condition". The only thing that does not work automatically is to reset the CER to what might be a better choice from a rebalancing point of view at that time. Also I have no automatic optimisation as I would like to have, as outlined above.

The problem I have with reacting appropriately to a price reversal while using a progressive ladder is not easily decided on. As to your suggestion:

Would it make sense to use the ladder as long as the stock is moving in the same direction but then in order to have the reverse trade it would have to

1) move to that next step on the ladder but also

2) The ladder would be reset with that next trade as the midpoint (just before you actually do the trade? or after?)

I am not sure what you exactly suggest with: “move to the next step”.
Suppose the price rises to step 4 and the holding zone is just past then it is logical to execute # 4 trade(no reversal has yet occurred).

If then the price starts to drop then the question is what to do! The price behaviour is still normal so there is to be a standard response: I do nothing seem to be the right choice. In step 4 I have sold a large portion of equity and I am heavy in cash. . .that is good for a dropping price(changed equity value into profit). At least I should wait for what the price is going to do next. If it rises again I do noting. If it drops again then what to do?

It might be wise to simply do noting. . .doing nothing is impossible . . .I mean: "simply not do anything". . .as the price keeps dropping the buy opportunities at low prices increase. . .this is the Don Carlson MARCO Delay. I just keep waiting till the next reversal occurs. When that happens close to the Mid Point I simply Reset the system with the new CER Value. This is perfect.

When the reversal occurs at the bottom, what then?. From an AIM consideration this is ideal. . .all of the Reserve(or most of it) is used to buy equity(if the equity id worth buying). Then I can again use the MACRO Delay on the rising price and as long as the price keeps rising this is fine. If ten the price drops again before the holding zone is breached I do noting but otherwise I just wait to see what will happen. All I can think about here is that as long as the price goes to the limits I change nothing but if the price cycling starts to create a narrower trading channel then I reset the system to that new Mid Point of the new Trading Range that has developed. In the meantime with that newer narrower trading range it is more likely that pricess fluctuate at greater relative rate and higher trading steps are advised.

If this is about what you suggested in 1) and 2) then I more or less had in mind what you had in mind! . . .”that what happens now is the clue for what to do next”. It just requires a lot of attention and keeping in touch with the price behaviour almost every day.

I will try to implement this on the USD/EUR and EUR/UDS Experiment I am running.
What I have done recently is 1) to make a price record in Excel from the Vortex Windows program, from which I can calculate the price-step changes so I can see where on the ladder the price sits relative to the Trading Range, and trade accordingly, and 2) I have the Ladder Chart with the Trade sized defined, but I have only done that for the X equity. I still need to make the Ladder Chart for the 1/X equity. Then for each equity I have the Ladder Trades defined and I can implement the scheme with the MACRO Delays .

To have this all done automatically is completely beyond my ability. . . .this exoeriment is very time consuming. People on the "street" have noticed that I have been away for while already! Also <OT> I am busy with improving my system for selling pictures via internet:

http://www.vortexcw.nl/vortex/picto.html

Now that I am retired I am busier than ever and have the luxury to loaf around when I feel like it