Replies to post #3698 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi Tim:RE Jeff's example:

The way AIM works is that you are averaging down. Another philosophy is to cut your losses and buy more of the stocks that are moving up(using stop loss orders to cut your losses.

In talking to a friend who has been investing a lot longer than I when asked by me "so what do I do, the systems are proposing two different things, which one works" He Said "Both! but once you pick a system you need to stick with it "

Thinking about it now it is sort of like going to a casino and doubling your bet every time you lost (they will only allow you to do that five times I think....they are not stupid). Eventually you will win. And you will win back one dollar more than everything you lost and then you start over investing one dollar and doubling up if you lose. The longer you lose the harder (and more expensive) it gets which is the same as AIMing a stock that drops 90%.

So if you buy one stock and it goes out of business you lost everything you invested. But if you have ten different stocks (or a mutual fund or ETF)you will not lose ALL your money, only that amount devoted to that one stock. It is important to be diversified.

hope the above wasn't
Toofuzzy

Take the road less traveled. It will make all the difference.

[Conrad]

Right on Tim.

I will look a little deeper into the link you provided,But I havea darn good feel as to why AIM works(mosty of us do, I think).

In the meantime I have come to think that the problem of a fromal way of analysing AIM is much easier as I first thought(prior coudiness on clear thinking). See message # 3712.


I think the problem is to identify what is is presisely what that is to be done! When you talk about:

means-reverting log-normal variant simulated signal

I get the shivers! Maybe a coincdence, as there is cold air blowing trough my open window!

That stuff you mentioned is not included in the 3 things I know about math!

I would prefer first, for my own peace of mind, have to know what I am trying to achive. I am not yet clear on that.



Conrad