A.I.M. Users Bulletin Board

[Conrad]

Hey daisy42,

This appears as the music notes for a song to me... it is 100% in line with my thinking and what I have been saying all along.

My SAFE settings are now determined algorithmically.

Firstly, the size of SAFE is determined by the relative volatility of the holding. I have assumed a setting of 7 for the broad market (S&P 500), and the setting for various funds is determined from their 1 year volatility as compared with that of the S&P 500, with more volatile funds having larger SAFE settings. Bond funds can have quite small settings. These figures are updated monthly.


I think many others will agree in principle with what you have conjured up. Interesting is that you have created an algorithm for it and I am curious as a little kitten as to what that algorithm would be and I will try to pull some teeth on it:

1) Does the Algorithm have any elements in it that are specifically related to the AIM Trading system or is it only related to the Equity Volatility? I suspect that the Standard AIM Structure has something to do with it. . .as the SAFE Concept is specifically an AIM variable.

2) If my hunch is correct then the Algorithm you have created would obviously not be useful for Vortex AIM. . .I do not use a SAFE;

3) If however the SAFE calculation has a relationship with the Hold Zone settings. . .which was the case for Standard AIM. . .the Hold Zones and SAFES being all 10% AND you calculation has more or less the same meaning as the Hold Zones then I would possibly be able to use these figures as Hold Zones for Vortex AIM.

I already almost always use Sell Hold Zone that is larger than the Buy Hold Zone. . .as usually this is also the result of an optimisation using a historical Data Set

For the SPY Fund on which I am running Demo Portfolio I have recently changed the hold zone setting to a rather low level:

Buy Hold Zone = 1%
Sell Hold Zone = 2%. . . Still there is very little trading action!!!

To compensate the low value of the (PC-V) at 1% and 2% I have increased the Trading Aggressively to

Fb= 0.9
Fs= 0.8
With V being ~ 6000 this gives
Buy ~~ 60*1/(1-0,9)= 600
Sell ~~ 120*1/(1-0,8)= 600

In this case the Trade Size happens to be of the same magnitude but that is not always the case. This approach is as yet simply intended to generally create trading action on low volatility equity and to increase the Trade size levels to above the Minimum Trade Size and still make a profit in typical up-down cycles. With a Trade size of 600 and a trading cost on 10,95 per trade the trading cost is 3.56 % for a down-up Round Robin Trading cycle, at these conditions for SPY.
In order to make a profit I need to see if I need to change my settings or not. . . click. . click. . . Aha. . .I see that on this -1% and + 2% Round Robin I will incur a loss of 4.46% on the Buy, so this is not acceptable. I will have to adjust my settings to make a profit. . .increase Trade sizes and use bit higher Hold Zone level: ...click. . .click. . .
For example by trial & error using this:

HZ Buy = 2%. . .Fb=Fs = 0,95 . . . (this increases the Sell significantly)
HZ Sell =3%

The Round Robin profit is now 45,48% ! That a lot better J

From this it is clear that with small changes for the parameters and a trial & error approach it will not be difficult to find the appropriate parameter setting for a particular equity situation.

The trick here is to do that with an appropriate algorithm like daist42 may have done!

Using these guidelines I could build an algorithm for my Hold Zones and Aggression Factors by which the above results would approximately be achieved for an acceptable trading activity. Until now I have not bothered to do this. . . It would be an challenging thing to work on. . . .Maybe I will

It would be interesting to see the full extend of daisy42's SAFE- Algorithm.