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Strategies & Market Trends : A.I.M Users Group Bulletin Board

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To: OldAIMGuy who wrote (10401)	3/8/2000 2:49:00 PM
From: labestul	Read Replies (2) of 18928

Thanks for the answer on AIQ Tom. I am about 95% certain that I'll be attending in Vegas. I won't be 100% sure until about March 25th due to certain work related unknowns which should be cleared up by then. I have a general question on using AIM. Let's first consider a hypothetical stock which is selling at $5.00 per share and I set up an AIM account of $10,000.00 with half in cash and half invested in that stock. Now let's suppose that every week, month or quarter (depending upon the frequency with which we look at it) the price decreases by one eight. My first transaction was to purchase 1,000 shares at $5.00 each. If I were using the Money Spinner straight from the book then I would immediately issue a GTC order to buy 100 shares at 4 and 1/8. (The corresponding sell order is irrelevant here). Once the price dropped to this level I would purchase 100 shares and then issue another GTC order to buy 392 shares at 3 and 1/4. (Of course I would also cancel the prior sell order and issue a new sell order but that too is not relevant here). When the price finally fell to 3.25 I would purchase another 392 shares. This spacing of purchases on the way down seems to me to be reasonable although not necessarily optimal. It is interesting to compare this sequence to what AIM by the book would do. Using the formulae in Lichello's chapter 6 I would purchase 11 shares (actually 11 and 1/9 using exact arithmetic) at 4.5 and then 36 shares at 4.375 and then 49 shares at 4.25 and so on down to 3.25 where I would purchase 111 shares. In total I would purchase a total of 746 shares at each 1/8th from 4.5 down to 3.25 inclusive. This is a total of 11 transactions (after the initial setup) and does not seem to be very efficient even if it were somehow still profitable despite so many commissionable transactions. On this basis alone I would be inclined to reject this method. Fortunately so does Lichello because it will be observed that at least one of these transactions (i.e. the first with only 11 shares) violates the $100 minimum per transaction that Lichello sets in chapter six. If we apply this minimum then the first transaction would take place at 4 and 3/8 rather than 4 and 1/2 in the amount of 43 shares (actually 42 and 6/7 using exact arithmetic). However continuing on there would still be another purchase at each price level down to 3.25 with a total of 745 shares being purchased in 10 rather than 11 transactions. This too seems too extreme. My question therefore is this ... what would most AIMers do in this type of situation in order to take advantage of these low prices but to minimize commissions by reducing the number of transactions though not necessarily reducing the number of shares involved??? In attempting to answer this question myself I thought about placing another minimum on the trades. Specifically one could require all trades to be for a minimum of 100 shares. Using this criteria my first trade would not be until 4.125 for 112 shares (112 and 4/33 using exact arithmetic) the next would be at 3.875 for 127 shares and then four more trades starting at 3.625 and ending at 3.25 per share. This would result in only 6 transactions for a total 726 shares. This seems to be a big improvement on the first two examples. My guess is that AIMers would do something like this (i.e. to set a minimum number of shares per transaction). Is this true? I hope this was the appropriate forum for this type of question. If not please let me know. By the way ... this question arose while I was running simulations comparing AIM and the Money Spinner. At some point I will put up the results of my studies on my home page and will announce here its availability. Barry mailto:bv@bsavage.net bsavage.net

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