A.I.M. Users Bulletin Board

[Conrad]

Clive, Ref. PC2=PC1 + Buy. . .I am so glad you addressed this issue so eloquently!

There's still a difference of $2000 between Portfolio Control and the actual value of our stockholdings, despite the fact that we've just invested $2000. And if we go ahead and invest another $2000........

You are of course right to conclude this effect is there. . . but this is in principle no different to what the Residual Buy does, which I called the Lichello Flaw many years ago on this Forum as a result of the standard AIM PC-updating with

PC2=PC1 + 0,5*Buy

The answer of AIMers is that they would ignore the Residual Buy, ignoring the problem of too aggressive buying that result anyway because just after one had bought shares AIM still has that $ 1000 difference (in your example, instead of the $2000 difference).

Ever since AIM was developed users have complainer about the high Cash Burn Rate for dropping prices, and have been tinkering with all sorts of ideas to get around that basic Lichello Flaw. . .The Residual Buy that is ignored after the Primary Buy is carried over to the next Buy anyway, because the $ 1000 Difference(PC-V) is there to start with and the next Buy is rather high.

That is why I have developed the alternative Trading Function and created Vortex AIM:

1 Sets the Trading Amount as low or as high as one wants it (investor control)
(slow conservative trading that reduces the Cash Burn to desirable levels)
2 Automatic adjustment to the PC-update so that after a trade execution so the Trade Advise = 0 after every trade.

This achieves that as the price drops one starts with a Difference =(PC-V) = 0 and the price must drop much lower to get to an executable trade as compared to standard AIM. That starts with (PC-V) is 1000

So Vortex AIM has a built-in Brake that all AIMers are eagerly seeking
For Low aggression trading the AIM PC-update could be

PC2=PC1 + 0*Buy . . . . .for a low Cash Burn Rate( Constant Equity Value Case)

or for high aggression trading it could be

PC2=PC1 + 0,9* Buy . . . .a high Cash burn Rate which would require extra cash to be found for effective trading (TurboVest Method)

if that is what the investor wants to do. In each case after the trade (PC-V)=0 . . .eliminating the Residual Trade Advice.

I am really on a holiday, but this is so much FUN, I consider it Holiday Work.