VORTEX AIMing

[Conrad]

Ref Post # 35885 on AIM Users Bulletin Board.

Hi Ray. . .Your question caught my attention.
I the past a great number of discussion have been held in this. I was the one that originally found the Residual Buy very illogical. . . and coined the term “The Lichello Flaw”. In the meantime I no longer call it a flaw and agree that it is feature.

I have specifically created Vortex AIM to get rid of the Residual Buy and created the following method to do so. . .it appears exactly what you have in mind:

PC2 = PC1 + f*Buy

And from this I formalised the analysis andI caluclated the value of f to make the Buy to Include the Residual Buy. All he time I had in mind simply to modify AIM a bit, not really intending to createa comopletely different method. . .For example I had no intention right-a-way to update the PC after a Sell.

The analysis showed that the Buy contained the f-factor and became

Buy =(PC1-V)* 1/(1-f) = (PC1-V)*Mb. . . Mb = Multiplication Factor for the Buy

and so the PC Update modification became

PC2=PC1 + f*(PC1-V)/(1-f)

PC2=PC1 + f/(1-f)*(PC1-V)------> This results in PC = V2

And the Residual buy is gone!

Buy = (PC1-V1)*Mb = 0


Having found this result I liked it so much that I have also introduced that format also for the Selling, although for the selling the rationale behind it is simply to create a Sell Multiplication factor

Sell = (PC1-V)*Ms. . . .Ms = 1/(1-v)

and the PC Update formula becomes. . .of you want to do so:

PC2=PC1 + v/(1-v)*(PC1-V)

f= Buy Aggression Factor
v= Sell Aggression Factor

Using f=v= 0 gives the Default Option. . .(Standard Vortex AIM)

These are very conservative aggression values resulting in Buy amounts much smaller than for Standard AIM because the PC remains the same after a Buy. See Note (1)

For f> 0 and v>0 the trade amounts grow strongly and one can select the trade aggression as is desired so that the trade amount are large. . .for example for Low Volatility equity.

The is the Vortex Method

(1) Suppose you use the following Aggression factors:

f= 0,6
v=0
The Buy would become (PC1-V)* 1/(1-0,6) = (PC1 – V)* 2.5
1)This a rather aggressive Buying
2)This gives an almost identical Sell performance as AIM. . .No PC Update after a Sell.