Replies to post #4420 on A.I.M. Users Bulletin Board (AIMUSERS)

[Conrad]

Karel,

Certainly, I can do that, but I should mention that what I call optimised may not be absolutely optimised, as with the 5 variables I use there are various peaks in the Yield Surface.

For example if I set the Sell Resistance to ~ 70% I get a completely different combination of parameters and also a Yield in the neighbourhood of 15%-20% or so. I did not optimise that peak as I firsts found a peak with the Sell Resistance at 20%, which appeared more attractive(but will be more costly in trading fees!).

As I mentioned, I can select an operating mode that focuses on share accumulation rather than cash maximization. So, what does un-optimised mean? There are choices to make in this. If I choose a completely arbitrary set of parameters then I might choose a set that ends up with a 50% loss or so, by trading stock at a loss each time. So, un-optimised can not mean
arbitrary parameter selection.

On the other hand, I have experience in selecting parameters which will give excellent performance, as I am beginning to see the multiple variable relationships. So I could pick a set of parameters that will give probably 15 % to 20 Yield right of the bat with this stock, as I already know the high yield options.

Also the cash Equity Ration is very important. I can select the most effective one.

Instead, what I will do is this:

Minimum Buy/Sell = 10% of Stock Value(SAFE is not used)
Buy Aggression =0
Sell Aggression =0
Cash/Equity Start Ratio=50%

Or do you want to see this with the same 20/80 Cash/Equity Ratio as the result I showed before? What the hell, I do them both!

This Vortex Mode is more conservative than the English Conservatives. This Mode is for the Scared!

Actually, this is the Vortex Neutral Mode in that for the upside or the downside it has a symmetric buying/selling plan. For buying and selling: PC2=PC1.

In operation it sells off the profit and reinvests the profit as the price drops. It is nevertheless a Growth Mode! Perfect Symmetry in this case does not mean that there is no growth potential.

I will let you know the results soon.

Regards,




Conrad

[Conrad]

Karel,

Here is the dope on the 20/80 and the 50/50 Vortex Simulations for the SPY Jan 1, 1998-July 1, 2000. The figures tell their own story.

My observation is that if you consider the cash earnings there is a very significant advantage over the Buy and Hold investment gain. This supports my earlier argument that the B*H approache will almost never beat an AIM, and if you also consider the lower investment base for the AIM then the yield on the basis of invested capital will be the same for an AIM as B&H if the share price runs straigh up without cycling.


Anyway, investments that don't cycle are not interesting, so I claim that B&H will never beat a good AIM on cycling stock.

The tables below are screwed up! In the Editing/Preview Mode the data is lined up quite well but as soon as it goes in the Final Mode it gets out of wack a lot. If you want the data lined up(in a matrix) I will send it to you by e-mail. Just give the word!

Neutral Vortex Mode 20/80 Cash/Equity Ratio 
 Remarks for neutral parameters Start Capital =20 000 
  
 1   Buy & Hold Yield	Profit	5,77%	 
 2   Number of Trades 	7	234,57143 days/trade      7,706659 Month/Trade 
 3   Annual Yield		2,7	 
 4   Direct Yield	Profit	12%	 
 5   End capital		       $22.459	 
 6   Cash/Stock Ratio		20/80	 
 7   Lowest cash		        4000	 
 8   Highest cash		12282	 
 9   End PF Value		$22.459	 
 10  Highest PF Value		$28.476	 
 11  Lowest PF Value		20000	 
 12  Buy Aggression		0	 ----Rw=Constant at $16000 !! 
 13  Sell Aggression		0	 
 14  Minimum Buy % SV	       10	 
 15 Minimum Sell % SV	       10	 
 16  Interest of 4% added Yield 	2,7	/yr 
 17  Interest Income @ 4%	0	 
 18 Dividend added to Reserve	820	 
 19 Note that with the high cash		 
 reserve interest earnings would have been	 
 approximately (at 4%/yr)	1740	 
 This raises the Yield to	20,99	Percent vs Buy & Hold Investment 
  
 Neutral Vortex Mode  50/50 Cash/Equity Ratio 
 Remarks for neutral parameters Start Capital =20 000 
  
 1   Buy & Hold Yield	Profit	5,77%	 
 2   Number of Trades 	7	234,57143 Days/Trade	7,706659  Months/Trade 
 3   Annual Yield		1,7	 
 4   Direct Yield	Profit	8%	 
 5   End capital		       $21.537	 
 6   Cash/Stock Ratio		20/80	 
 7   Lowest cash		        4000	 
 8   Highest cash		15176	 
 9   End PF Value		$21.537	 
 10  Highest PF Value		$25.298	 
 11  Lowest PF Value		20000	 
 12  Buy Aggression		0	 ----Rw=Constant at $16000 !! 
 13  Sell Aggression		0	 
 14  Minimum Buy % SV	       10	 
 15  Minimum Sell % SV	       10	 
 16  Interest of 4% added Yield 	1,7	/yr 
 17  Interest Income @ 4%	0	 
 18 Dividend added to Reserve	$512	 
 19 Note that with the high cash		 
 reserve interest earnings would have been	 
 approximately (at 4%/yr)	2560	 
 This raises the Yield to	20,5	Percent vs Buy & Hold Investment

Clearly the 20/80 performace is better without interest on the cash added. With the interest added they give about the same.

The interesting thing in my opinon is that for the zero agression and PC is constant for the full 4,5 years the gain over the Buy and hold is still signigicant, although I figure it might be very similar to what the AIM BTB performance would get on this stock.

Dropping the Minimum Buy/Sell to 5% makes almost no difference althouh it increases the number of trades. Obviously making the parameters variable and increasing the options for changing various things such as the PC-Updating, a Beta factor like AI 1.0 from Mark Hing had, provides the potential for getting high yields.

Regards,


Conrad