A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi Adam and Steve, Re: increase in share price over time.....
The nice feature of using a "vealie" now and again is it is triggered by stock price activity itself and not an attempt to predict the future. Only when AIM tells us to sell some of our position does it become a consideration.

At that point, we look at our Cash Reserves relative to our remaining investment and make a decision as to whether we can tolerate any further risk. If the answer is "no" we sell. If the answer is "yes" then we can exercise the "vealie" and increase the Portfolio Control value by half the amount of the suggested sell.

This acts as a tiny nudge to the Hold Zone.

Expanding the SAFE values in the middle of a program expands the size of the Hold Zone. This will also inhibit the Next Sell. It also may dampen the trading activity on both sides which had been established and found successful by other means. Personally I feel the "vealie" is a bit more subtle.

So rather than a guess about the future of the markets and where PC should be, "vealies" are a market driven device{just as AIM is). It adds a consideration to the Sell function that was not in original AIM. That consideration could be viewed as arbitrary, but it really is based upon the then current Equity/Cash ratio. One can tie this to a specific ratio such as 50/50 or 67/33 or one can use a floating ratio such as the I-Wave gives us. With LD-AIM, the ratio of "real remaining shares" vs cash might be something like 25 stock/75 cash or 20/80. The ratio would be chosen on some basis with roots in experience.

My thought is that if you start with 300 or 400 shares in a LD-AIM account and the market moves upward so that you are down to 100 or 50 remaining shares, you've done a pretty good job of reducing potential downside risk. You've also accumulated a sizable cash reserve relative to the remaining share value. It seems that a "vealie" based upon either a combination of the virtual and remaining shares and one's cash reserve or, with a different ratio, remaining shares vs cash reserve could prove productive in capturing price appreciation in a "growth" stock.

Best regards,
Tom