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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: OldAIMGuy who wrote (15155)3/7/2001 1:08:24 PM
From: labestul  Read Replies (1) of 18929
 
Thanks to Tom for an excellent post. I have some thoughts on this post.

To me the most important aspect of Lichello's basic system is that it removes emotion from the trading process. (The other important aspect of course is that it works!!!).

Any formula based system removes emotion as long as it is followed. As a general rule I believe that one can set the parameters of a particular AIM account to suit the nature of the stock. This of course includes buy and sell safes but also includes (as I pointed out in a previous post) the frequency of trading or at least of inspections.

Once an AIM account is functioning there is great danger in changing any of the settings including the trade frequency parameter. The danger is that we might be changing for reasons that are partially or even fully emotional without realizing it.

I think that Tom's algorithm for changing the trade frequency on the buy side is clearly formula based and not subject to emotion. Therefore I think it is an excellent idea in theory.

Is it however any good in practice? Only back testing and actual experience will tell us of course but at first glance it certainly seems reasonable to me. The one aspect of his formula that might seem strange to some is the inclusion of the cash level as a controlling parameter.

This is in fact not strange. Cash level appears as a controlling parameter on the sell side in the use of Vealies. It has also always been a controlling parameter on the buy side for those do not use margin. That is once cash hits zero there are no more buys!!! Tom's formula is in effect a more elaborate version of this more basic and fundamental formula.

Thanks Tom, I will be running some simulations on the basis of this formula and will report back any interesting results.

Barry
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