Replies to post #24 on A.I.M. Users Bulletin Board (AIMUSERS)

[The Grabber]

Rien:

Welcome. You're asking two of the great AIM questions! For most of us, the Safe settings and Minimum trade sizes are a matter of personal preference, experience and the issue being traded. For my part, they are typically 5% Safe (or Resistance) and $1000 or 5% of Portfolio Control (whichever is larger). In this way I can calculate and place GTC limit orders on both sides (I do have a day job!). There has been much debate over on our main BB about this over the years.

That being said; I agree that if one could somehow determine a pattern, then these settings could be derived for maximum efficiency (read potential).

The same could be said for the 'tilt' of the settings basis trend. I'm sure many of our TA friends could weigh in on that point better than me. I'm of a mind that once you go down that slippery slope, your defeating one of the basic tenets of AIM in that stocks price can either go up, down or stay the same. Odds of any of this happening are pretty much equal. AIM works because the formula decides for you how to react (or not) to those movements.

There are many ways we've all attempted to derive optimal settings including some portion of the ratio of the 52 week high to the low, Standard Deviation, etc, etc. I've been dabbling with using Williams % R measures.

But it does need to be stated that Lichello didn't want AIM to be an 'all consuming' endeavor once a program is set up. Rather it should not take more than 'a few minutes a month' to manage. His basic approach is based on 'checkup times' usually once per month. Then the results (and actions) are simply what the formula derives.

Personally after over 2 years of actual AIM-ing, I've not gotten past my OCD-like tendancies to tinker. I suspect that's true for most of us AIMvestors. No matter. Kind of keeps the interaction within our community pretty frequent and compelling. And I for one am not ashamed to admit that this means a lot to me.

Regards, Steve

[JSLyons]

Hello Rien,

Nice to see you made it from TMF... I've been playing around with the ZIGZAG metric (you can find it for free on Stockcharts.com to get some idea of how often a given equity moved by a given percentage, up or down.

I set the Zigzag for 35 percent, to get a sense of how often my AIM accounts might be expected in the future to move through the Hold Zone and complete a buy-sell-buy or sell-buy-sell cycle -- which as you know is the Holy Grail of AIM.

You could use zigzag to help you with your project to fine tune the SAFE settings. However, I am not necessarily endorsing this approach, as I tend more toward the conservative, BTB approach.

Good luck,
J

[OldAIMGuy]

Hi Rien,
I set the size of the HOLD Zone somewhat in a way like you are describing. If you look at this graph, on the far right hand side is a yellow (at least on my screen) bracket that indicates the Hold Zone's size.


If that bracket looks way too big for the usual historical trade range of the stock, I'll sometimes, after a few frustrations of not achieving a trade, go in and modify the SAFE to reduce the size of the range.

In general, I want the Next Buy and Next Sell prices to be within the limits of the previous 52 week highs and lows. That way I'm almost assured of getting a trade or two in a year's time if not more often.

Hope this helps,
Tom