Replies to post #35666 on A.I.M. Users Bulletin Board (AIMUSERS)

[Conrad]

Hi Fuzzy:


If you keep track of the buys you don't make (and disregarding that the price has to move up a bit for you to buy) and then BUY THEM ALL

you will buy more shares than if you do one AIM directed buy at that same low price. (As if the price dropped that amount in one month)

What you are saying may well be right. . . I have no longer an AIM spreadsheet to see how the two methods I described would compare and hoped someone would run the two options for the Standard AIM. Use the example for Standard AIM:

Capital = 20000. . .SER = 50/50

Option 1 is to let the price drop, record the sum X1+X2+. . .Xn to the point at which the Reserve becomes zero, using normal AIM practice. Then the SUM of the buys should be about 10000 and the question is: "At what price does this point occur?";

Option 2 is to let the price drop in normal Hold Zone stages and see how the Buy Advice increases to be about 10000 and also: "At what price does that occur?"

The question is not at all if that is good or bad. At this stage I am simply analysing options that can be used with Standard AIM.

I had planned to make a numerical example with Vortex but this was delayed. I will do that later today.

Just Curious :-)
Regards,

[Conrad]

Toofuzzy,
Just to complete my remarks on letting the price if an equity drop an executing intermediate virtual buys or to let the price drop without intermediate executions I have calculated the different responses

Capital=20000
CER = 50/50
Price = 100
Hold zone 20% I have chosen an aggression factor of 0,25.

There were 4 price drops to a price of 40,96 the Buy Advice at 40,96 was larger than the remaining Reserve so I executed the forth Buy to get the Reserve ro 0:

Reserve = 0 so 10000 was spend to buy 182 additional shares.
Ntotal = 281 Shares
Equity Value = 115482
Virtual loss = 8452

The I did a single buy @ 40,96 to exhaust the Reserve and I could buy 194 more shares:
Ntotal = 294 Shares
Equity Value = 12042
Virtual loss = 7958

My next trial was to drop the price to 26,21 and then exhaust the Reserve. This allowed me to buy 381 shares:

Ntotal = 481 Shares
Equity Value = 12621
Virtual loss = 7379

Although the general effect of delaying the buying has always been clear fir AIMing and is the essence of Ocroft's earlier post # xxxxx. I find it useful to bring this effect numerically in focus beyond the verbal messages in the subject that are sometimes difficult to "translate" to make it clear how this is happening. From the above it is interesting to note that in this example during a continued equity price drop

1)the equity valueis increasing;
2)the Bail-out loss is decreasing;
3) the number of shares increases.

This really presents a clear "picture" of the potential power of AIMing is if one invest in equity that is volatile and has a near zero chance of becomming worthless

I might add here that the principal effect of using an Aggression Factor > 0 is responsible for adding a little more equity than is lost due to the price erosion. This is clear from the Buying formula

Trade= (PC-V)*1/(1-f). . . .and for zero trading aggression f=0 ----> M=1

This conforms to Lichello's original thought that equity value should remain constant during the up & down trading.