Replies to post #37724 on A.I.M. Users Bulletin Board (AIMUSERS)

[Conrad]

I remember that Ocroft Method quite well and I saw the virtue of it: “Do not take too much Risk and be not to be too Greedy + do some wise Stock Picking"

It essentially amounted to an AIM Strategy without executing the Buy Advices but to keep track of the total Advised Buying Trades. . .If the Equity became a Deep Diver Ocroft would NOT have lost too much Money. . only the initial Inlay.

At a deep Point at which a Recovery occurred at about 10% or so, Ocroft invested the Accumulated Buy Advice, or the full Reserve.

When the Recovery continued all the equity was sold at a profit of 20 to 25 %. The trigger point was 20% as I remember it, and then sometimes the lot was sold at a higher point.

He did enough research on the equities to give him a good assurance that the equity would not be a Deep Diver and his experience was that he made very satisfactory above average yields, which was enough for him, not wanting to wait for a Killer Point. . .which would seldom happen.

The Ocroft Filter resembles the MACRO Filter except that the MACRO would not trigger any selling at 20% Profit but at an Upper End Reversal of say 10% and then Sell the AIM recommended number of shares.

Ocroft found that waiting for an Upper End Reversal would have too high a risk of a fast price decline so that Upper End Sell Order would not be executed until the price had reached a Deep Dive.

This Ocroft Filter can easily be modeled into the Vortex Threshold & Aggression Parameters. That is why I remember The Ocroft Filter.

[Adam]

Hi Toof, Re Ocroft method. Yes he mentioned he did research on his stock to make sure it does not become a deep diver. We all do that -- no one chooses a stock for AIM without considering the risk of it falling.

But the gist of his method was a buy filter, ie, when the stock drops into the buy zone you don't buy until the criterion of his filter is fulfilled. If you remember it took a while to get the exact details of what he used as his filter but it went something like this.

Check on the stock once per month and if AIM tells you to buy, you instead show on your spreadsheet a virtual buy but you don't actually execute it with your broker. You keep doing this until the spreadsheet show no more buys. At this point the presumption is the stock has stopped falling and you're free to execute your buys. The idea is that you prevent buying a falling stock and only buy it when it starts its recovery.

In my experience when I've used this method on a few stocks I've missed the buys when the stock declined, and then when the stock recovered a bit it went back into a hold zone, so AIM ended up doing nothing. There is particular stock price pattern where his method works well, and if it does not follow that pattern the filter just ends up poisoning the AIM mechanism.

The best way to avoid the deep diver problem IMO is just to use ETFs instead of individual stocks and trade according to AIM recommendations. The risk of deep diver is much reduced with ETFs.

In the case of AMZN I had several sells and Vealies, and when the stock dropped I just waited a bit after my buy point was reached and then executed my buy (at 293.5). If I see the stock falling sharply I wait a bit for things to stabilize on the chart and then just execute the AIM buy.