aptus,
At the risk of dragging this out, and I don’t much follow the AIM board so I had to peek to see what the ruckus is about, I will make a couple of points.
Now, I don’t AIM, but I have tried to slog through AIM spreadsheets in the past…with the prompting and guidance of Myst I might add. I loved the investing idea not to mention the Excel challenge of it. In fact, I’ve traded more than a few spreadsheets with Myst over the past couple of years. He opened up the AIM trading approach to me and I tried to offer back a little Excel help. I’ll venture to say that Myst is not just the creator of XD, but if not an expert also very well-versed in AIM.
I have AIM derivative spreadsheets on various hard drives that I think are the some of the early beginnings of XD. I’ve always felt that XD is a direct offspring of AIM. No AIM, no XD. At the very least, I can tell you he has stayed up late many a night trying to tweak Safe amounts, Ad-safes, Advice amounts, and various formula inner workings of Portfolio Control in order to improve AIM returns. Most importantly was his idea to link these tweaks to price changes/trends.
This may be a small point of contention that you have, but AIM and XD are blood related. Furthermore, I don’t think that Portfolio Control separates AIM from XD.
And here’s where my AIM ignorance comes to the forefront (not to mention this excellent Tylenol with codeine), so please set me straight…you too, Myst. I think your main argument on the difference between the two is that PC and price determine trade signals in AIM, whereas XD doesn’t have a PC therefore price is a sole determinant of trade signals.
It seems to me, once you get past the offputting labels of Portfolio Control, Safe, Advice and all, that both really only use money available and price as the only determinants. Isn’t PC a result of original money invested that is subsequently adjusted depending on actual trades, with a different adjustment amount (tweak) whether it’s a buy or sell? Different tweaks lead to different results.
I imagine PC as ‘adjusted’ real cash in the account or hedged money available. XD uses actual (unhedged) money available. It's only the percentages of real cash that are different. I know that PC just keeps going up and thus drifts away from the actual cash in the account, but it still is a derivative of it. It just makes the math work a little harder to generate a trade signal.
While this hedge on real cash may offer some level of risk control, to me it seems an area where XD really outperforms. XD will be aggressive, even in a downtrend, to build returns. After looking at a number of comparative spreadsheets, I do think the bigger risk is to use AIM and do nothing but wait for a long climb back after a steep price drop (which may never happen) than to use XD and trade no matter the trend. Extreme price deviations are a blessing for a downwardly mobile stock.
Furthermore, both use the change in price as the other key factor to signal a trade. Price determines Stock Value, which is then compared to PC and then bring in Safes, Advices and Ad-Safes and such and a trade is signaled. In XD, price deviation from a moving average is the key comparison, if money is available a trade will be signaled (depending on an adjustable Buy/Sell multiple).
Again, I’m not an AIM expert but it seems to me there a number of variations out there that are efforts to tweak all the different ways to adjust PC and Safes and everything else in AIM to amplify returns. It seems to me that XD is one of those efforts and a particularly excellent one at that. Maybe the best!
Regards,
Steve
