Hello Everyone,
For those that are interested in the new Automatic Investor 2.0 please read on, otherwise feel free to skip this note (as it is rather long and has to do with utterly nothing other than AI 2.0 features).
I have been working on using volume to enhance AIM returns. Over the past few weeks I have "kicked around" a number of algorithms and run numerous historical simulations in the alpha version of Automatic Investor 2.0 (my DSL modem is complaining about being overworked and wants to start talking to other DSL modems about starting a union, local 1.5Mbps or something like that. Anyway I nipped that in the bud with my firewall ;-)
Last night I ran each DOW stock through a 5 year test (and a selected few through a 30 year test) and found very encouraging results. Each stock was run through AI 2.0 first without the volume enhancement (called the "volumizer") and then with the volumizer enabled. The standard Lichello settings were used (i.e. 10/10/5/33) in both cases.
For the 5 year tests, 23 stocks had a significant increase in returns when using the volumizer over regular AIM BTB, 3 stocks significantly beat the volumizer when using AIM BTB and 4 were too close to call.
For the 30 year (or all available data if there was not 30 years of data available) tests I used 12 DOW stocks, 10 stocks won using the volumizer and 2 won using AIM BTB.
I also tested MOT, YHOO, AMZN, AAPL, AOL, and EBAY using various timeframes. YHOO, AOL, AMZN and MOT all had very significant increases using the volumizer (e.g. AMZN went from 72% to 366%). EBAY was too close to call and AAPL did better with AIM BTB (BTB= 25%, Volumizer = 11%).
A very volatile issue, MSTR, provided the largest difference (BTB=274%, Volumizer=935%).
The results appear to support what I've always believed (and mentioned on this board a few times) that volume has useful information that is not captured by AIM BTB.
However I do need to run more tests and am waiting to see what happens when the volumizer is combined with different Automatic Investor models (i.e. settings other than 10/10/5/33).
My apologies to those that requested information on the models research earlier, I've been a bit too busy to write up the results, but I will email it to everyone once I get a chance :)
I've also been tossing ideas around with Barry Savage regarding his frequency and amplitude algorithm and am well on the way to implementing something very interesting in Automatic Investor 2.0. It will tie together AIM, AI models, the volumizer and a modified version of Barry's F&A algorithm. When AI 2.0 hits the streets I think an entire new group will be introduced to the AIM concept. Of course all of this stuff can be turned off, so those that want to stick with simple AIM BTB can easily do so.
One other thing I've just enhanced is a parameter optimizer. We've been using this tool for some time now as we developed our models, but I think it's about time to let others start playing with it and start developing their own models if they so wish. It is capable of tuning up to 5 variables (i.e. Buy Resistance, Sell Resistance, Initial Cash, etc.) at the SAME TIME. You can also choose the date range you'd like to tune for as well as the update period (i.e. daily, weekly, or monthly). Once it's done, you can save the settings as a model and import it into the Automatic Investor software.
Both the volumizer and the optimizer will be in AI 2.0, but I'd like to release them both to a limited number of people. If you're interested then please send me a PM and I'll arrange to send you the alpha version starting in Feb.
Keep in mind that you'll be expected to spend a few hours a week testing and using these two components and emailing me your results, comments and any problems you encounter.
I have to limit alpha testers to 5 experienced AIM users as I intend to work closely with them. If you are already familiar with Automatic Investor, it will be easier for you to get started, but this is not a requirement as long as you are an experienced AIMer and are currently AIMing REAL money. For your efforts you'll receive a free AI 2.0 program (or upgrade) when it is released. Priority will go to current AI users.
If things keep going well on the R&D front, I'll have material for 4 or 5 AIM papers to present at the next AIM conference (so if you'd like to present but don't have a topic, let me know. I have extras ;-)
As usual, comments and questions are always welcome.
Regards,
Mark.
(If you've read this far, that's amazing. I didn't start out trying to write a really long note, but sometimes these things just happen.) |
