Replies to post #202 on Advanced Automatic Investor

[DonCarlson]

Hi Leap,

Could you expand a little more on what you were doing with the slope? Do you have any sample spreadsheets around?

About a year ago I was trying to use slope to automatically rock the safes in one direction or the other. I did not have much luck with the idea at the time.

Don Carlson
[e-mail]

[OldAIMGuy]

Hi Leap, Since first using AIM with a computer, I've always included a 26 week moving average on my graphs. This was only used in a general way to augment AIM. The effiency of AIM to trade the "right" side of that moving average has always fascinated me. Knowing that AIM almost always traded on the proper side of the MA let me to the decision to always wait unti the proper side is reached.

Adding a short term MA and cross-over points to improve the "timing" of AIM's purchases would seem a logical extention of the same general idea. It could potentially improve AIM's cash utilization on the buy side and improve the profits on the Sell side.

I hesitate to guess what "one size fits all" set of MAs might be. This makes the selection somewhat non-automatic. If back-testing shows some helpful traits, then they may yet be helpful in the future. I guess it would be interesting to know what would be the best overall pair of MAs to use for any stock. For instance, if 10% SAFE works well with most stocks, what MA pair would be good for most stocks.

Possibly there's a general setting that could be applied to almost any stock (like Lichello's standards) that would provide enough boost in total return and return on capital at risk that it could be used across the board without tweaking.

Best regards, Tom

[Conrad]

Hello Leapyear,

I have also seen the discussions on updating frequency, but never agreed with the arguments that updating should only be done monthly, or at any other fixed period. You stated:

The market is dynamic and so should AIM. By this I mean that the market should dictate if the update is Daily, Weekly or Monthly.

With respect to the dynamic aspects, may be the tinkers among us could create the DYNAMO AIM which would create a lot of charge in to AIM investing!

Seriously now, I can't imagine anyone on this Hyper Board, or rather any serious AIMer, that looks at a stock he is AIMing only once a month or only every two weeks, let alone every Quarter! It would be like a politician that only watches George Bush only once a month!

With respect to AIMing there are various ways of managing an AIM portfolio. If you look only once per month at your stock you can miss significant dips or peaks in that month, and the purpose of the AIM is to catch these Volatility Extremes. If you ignore that the AIM is just like a flat tine: A flat tire is a still a tire, but it most important fact is that it is flat! It needs fixing!

In practice AIMers already will look at the market every few days, and if they notice a big change they will jump into action even though they call them selves Monthly AIMers: At least with half an eye they will keep tracking their investment. So, my point is more like yours: If the market moves it IS the signal to do something or to sit tight. If after a month nothing has happened it might de a good thing to pick a more volatile stock, or to increase the aggressiveness of the AIM. Even with MACRO AIM one might miss various cycles within a sustained upwards or downwards movement.

My suggestion is also that the market should provide you with information as how you can best update the AIM, and for some stocks that may well be a daily update. I would hate to miss a few large fluctuations with a week.

My advice is to update when necessary: For some people that may be a move 10% but for others that may be a move of 50%. I would love to AIM a penny stock wit a 50% daily move! It is not important if I do not get many opportunities to do this, or if such stocks are usually very risky(a risk profile is a selection issue , not an AIM issue). The point is that closing your eyes for a month may cause you to lose a lot of Portfolio Growth Opportunities.

My vision for a Perfect Vortex System is to have an automatic daily price downloaded and then automatically let the program decide of the update should be done or not. This way I would only have Trades recorded and the system memory would not be loaded up with garbage(data on which no trade is made). At the same time the system would decide when a parameter optimisation is needed, and carry it out when needed. I would still be the "driver" for this Super AIM and would override it, if necessary!



Conrad

[aptus]

Hello leapyear,

"By this I mean that the market should dictate if the update is Daily, Weekly or Monthly."

This is a good idea. However implementing it so that it works consistently is very difficult.

Since the risk of more frequent updates is that you'll run out of cash (as well as buy too soon), one idea might be to incorporate Tom Veale's Idiot Wave into the update frequency. When the IW components are all showing low-risk, you increase your update frequency. When they're all showing high-risk, you decrease your update frequency. When they're in the middle, you do something else (that'll be the difficult part).

If you have any other implementation thoughts, I'd certainly like to hear about them.

Regards,
Mark

http://www.automaticinvestor.com