Replies to post #6623 on A.I.M. Users Bulletin Board (AIMUSERS)

[Myst]

Are AIM and X_DEV similar?

Probably best debated in forum where the spoken word can be heard, with all the passion and subtlety inherent in public speaking. However, since this is the 2000's and internet message boards are "where it's at" so to speak, I'll give it a shot, even though I'm not sure the question is very important anymore.

In my view AIM and X_DEV are very similar in some respects and not in others. I think the algorithms used in both are incredibly similar, though it's fairly obvious that when dealing with math the smallest numbers can change things in a big way.

Aim generates a buy if A) the stock value deviates far enough below the beginning stock value (because of a price drop) and then B) the difference between the beginning stock value and the current stock value is larger than the SAFE amount, which is a percentage of the beginning stock value. That difference is then used to buy shares.

X_DEV generates a buy if A) the price deviates far enough below a moving average price and then B) the amount of the deviation is multiplied by the portfolio value to calculate the amount to buy.

In most cases AIM signals and X_DEV signals are the same (and I have the spreadsheets to prove it). The only difference is the way the buys and sells are "sized" as Aptus would put it.

AIM is very conservative in the way it sizes trades. X_DEV is generally more aggressive than AIM in sizing but X_DEV "sizes" are flexible and can be adjusted to fit the users risk tolerance. AIM BTB can not alter it's sizes and assumes "one size fits all". If there was only one class of investor, than AIM would either be great or worthless for all of them. Since there is a certain segment of the investor demographic that "fits" for AIM then AIM is great for them. AIM is a very good conservative strategy for the very long term patient investor. The various AIM derivatives are essentially attempts to fit all the other kinds of investor profiles. I feel the AIM derivatives are like people.........not better or worse, just different. Different strokes for different folks. There efficacy is dependent on the user sticking to the rules of the system.

Are AIM and X_DEV trading tools or mechanical systems?

AIM BTB can be called a mechanical system, but as soon as you alter it, doesn't it become a trading tool? The premise of X_DEV is "capturing short term trading opportunities for long term performance". If I X_DEV the same stock for 1, 5, 10, 25 years can you label X_DEV as a "mechanical system" or a "trading tool"? And does the label even matter anyway? Perhaps to some and to others it won't. Such is the way of things.

Hopefully AIM'ers and X_DEV'ers both will prosper in the New Year!

Best wishes to all,


~Myst~

[irwin]

Hi Mark Well said Here is a good book for those who would like to grasp the concept like you have.Should be in your local library system.
A good system needs only three rules.
1) Entry
2) Exit with profit
3) Exit with loss
Those rules can be anything as his example of buy on Monday sell at the close system.

Book Review: The Trading Systems Toolkit
Written by Joe Krutsinger
Published by Irwin Professional Publishing, Burr Ridge, IL
246 Pages, $55.00, 1994
ISBN 1-55738-534-3
Reviewed by Dale Luetscher

As the title suggests this book provides the reader with tools to develop his or her own trading systems. The author, Joe Krutsinger, is an experienced broker, trader, and system developer. After 20 years of experience as a broker Joe saw first hand the need for most people to use a set of pre-defined rules, a trading system, to guide them in their trading decisions.

In addition to his experience as a broker Joe has developed over 500 trading systems; some of which he shares in this book. At the time this book was written Joe was Vice President of Research at Robbins Trading Company. Since 1996 he has been running his own consulting business for traders. See his web-site at www.joekrut.com.

The Trading Systems Toolkit is divided into two major sections. The first five chapters describe trading systems, how Joe got started, and how to go about developing your own trading systems. The second half of the book, chapters six through nine, takes an in-depth look at several of Joe's trading systems. This section includes the TradeStation code and the performance record of the systems illustrated. The book concludes with a chapter on the author's perspective of the future of trading systems.

When I'm considering reading or buying a trading book the first thing I do is look at the table of contents to get an overview of what the author has written. For this reason I've considered making the table of contents a part of my book reviews. Upon further reflection, however, I decided against the idea. Not because it wouldn't be a useful tool to you the reader but because there is a better way for you to get that information. You can go to web-sites like barnesandnoble.com, type in the title of the book you're considering, and click on the table of contents icon to see the book outline. I would encourage you to take advantage of this great feature to get a more detailed look not only of this book, but of others as well. Many times you can also find feedback of other readers who have posted their own reviews of the book you're considering.
By looking at the table of contents of this book you'll see that Mr. Krutsinger is a very practical writer. He writes to help the reader get off the starting blocks and make progress in developing their own systems. For example, he writes that the best way to get started in system development is to look at existing systems, such as the ones in this book, and find one that most closely matches the type of trading that you want to do. Next, he instructs you to copy the math of that system and use it as a base for your own system. Experiment with adding and subtracting different parts of the system until it produces one that you can stick with in your trading.

As the book comes to an end the following observation is made: "The real key to systems trading in my belief is: Follow the scientific method. Use an entry technique, and exit technique with loss, and an exit technique with profit, and design a system you will really follow in real-time, in the heat of battle." As Joe points out in several places in this book implementing your system in a consistent manner is crucial. If this means you have to have someone else make the trading decisions based on your system then that's what you should do.

I've been reviewing quite a few books on system development and this ranks right up there with the best. Joe's approach is practical and candid. He fully discloses the systems in this book but tells you right up front that "I trade the best and show the rest. As I develop better systems, I show my ‘old' systems."

These "old" systems make excellent examples and provide some foundations from which you can develop your own systems. Although this book was written back in 1994 most of the information is still useful today. Based on a five-star rating I give this book four and one half stars. It's well worth your time and money if trading systems is of interest to you.