Replies to post #35723 on A.I.M. Users Bulletin Board (AIMUSERS)

[Conrad]

Hi Ocroft:

"Move in for the kill at the bottom."

This issue has been on this Forum for as long as I can remember, although I can not remember now just how long that is :-)

What you are suggesting is essentially a sort of fundamental technique that is used in combination with TA. . .and with any other investment concept:

Identify the Bottom and jump in. . .Identify the Top and jump out

This is nothing else than the foundation of investing that any kid can undestand:

Buy Low & Sell High

There is nothing new here!

Saying that you would Not buy at 41 but at 46 (+12,2%) could just as well be

Not buy at 41 but at 44 (+7,3%) or even Not buy at 41 but at 48 (+17%)

Any Recovery price could work out fine or it could work out wrong(you said as much yourself).

So, you Buy at 46 and invest a Lump Sum =10000(you may have been waiting a year for this), then the price drops to 42. . .What do you do then? Do you have an algorithm for what to do at 42 ???

As has been pointed out this method can result in a disaster of repeatedly missing the bottom and buying high and repeatedly missing the top and selling low. . .(extreme example of course).

In the year you have been waiting to identify the Bottom @ a 12,2% Recovery the stock price may have cycled +/- 11,8% 10 times while on the average the price has dropped from 100 to 41 and then you would have been waiting for a year doing nothing An Vortex AIMing(1) approach with a Hold zone of +/- 10% may have executed 10 profitable Sells and reaped a good profit while you have been waiting 1 year for a 12,2% Recover after a price of 41 and have done nothing yet. An AIMer may have dropped in value a bit on the first 10000 but may have invested more money at low process and his number of shares would be increased a great amount on the cycle profits(Volatility Creaming).

On a down trend one can even increase the Total PV and then when the Recovery starts the large number of share acquisitions will accrue profits rapidly, and if the up trend is just as volatile then there is more profit reaping even when one is in a selling spree.

The point being here is that any one of us can propose a scenario that would work best for a particular Investment Scheme. . . and if the price follows the proposed scenario then it would beat most other system(if not all of them) that were not “geared up” for that specific scenario

You method is well known already. . . .So I am curious what you are actually presenting in relation to AIMing??? We already know about all many techniques that can be used for delaying the investments to lower prices.

So, is that the only thing you are saying. . . that it is better . . .generally. . . to invests only at the Bottom. . . and I presume. . . that it is better to sell only at the Top?

[Conrad]

Ocroft,
In addition to what I mentioned previously on the. . . (What is new about your method???). . . method you describe is very similar as a method already known, and was discussed at length, when Don Carlson described it many years ago using his MACRO Filter . . . Buying only after a price reversal a Bottom had occurred and similarly Selling at the top after a price reversal had occurred there:

MACRO: Moving Average Cross-Over

The only difference is that Don applied it after he had committed himself to buying right-away at an acceptable Starting Point with a CER he considered appropriate. The advantage with that is that if the stock that is bought started rising right-away then Don could reap profits right-away on the way to the Top!!!

I know the MACRO-method quite well! Don discussed it with me and I tested it for him before he published it. I also coined the name MACRO for him :-)

So, in that sense I see nothing essentially new in your method. The choice to start buying right away, or not, at Day 1, at an appropriate CER, is a practical one:

a) If the stock is to one's liking(Stock Picking) and moving down already then one better waits with buying till the Bottom(+Hick-up). . .(Read: Cross-Over). . .had occurred;

b) If the stock is obviously rising then jump in right away at the selected CER;

c) If the stock is moving sideways between a Trading Range(TR) then jump in very close to the Bottom of the TR.

I see no essential difference between that and your method. . .the differences are simply slight personal preferences based on market behaviour observations and understanding the “readings”.