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Replies to post #178 on AIM UK

Replies to #178 on AIM UK

ls7550

11/05/09 12:13 PM

#179 RE: infooverload #178

Hi InfoOverload

Of more recent I've started overlaying Mebane Faber's 10 month moving average indicator on top of AIM. So at each months review if the current price is above the 10m simple moving average then the stock is held as-is and AIM'd as normal. If however the current price is below the 10m sma then I sell the stock and leave AIM as-is until a later monthly review has the current price greater than the 10m sma. I'll then repurchase the stock again together with any updates (typically buys) that AIM additional indicates.

I wrote to Mebane and discussed how the 10 month moving average (comparable to 200 day moving average) is very similar to the stop-loss style that I've used for over a decade. Generally - on average - prices sit 7% either side of the moving average. Which also is close to 1 standard deviation distance.

In general I would suspect therefore that trading at 1 standard deviations would generally produce 14% hold zone ranges.

Your 4 trades a year figure implies a 6% step (12% hold zone range). If you're trading 10% of stock value and with stock value around half the total value (assuming 50/50 stock/cash) then you'd be making 5% stock value x 12% hold zone range = 0.6% x 2 round trips (4 trades) = 1.2% p.a. on average in volatility capture. That's pretty reasonable IMO.

ls7550

11/05/09 12:23 PM

#180 RE: infooverload #178

There is a MACRO-AIM version of AIM InfoOverload - the work of Don Carlson many moons ago. MACRO stands for Moving Average Crossover.

With MACRO-AIM you only trade when the 200day EMA (actually I think its more correctly something like 207 day EMA) is crossed. That way you might combine (postpone) several trades into a single larger and later trade (potentially buying and selling more at the troughs and peaks rather than cost averaging smaller trades during the run-up to those peaks and troughs).

Best. Clive.