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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 3:22:00 PM
From: axp	Read Replies (2) of 18929

Tom - you have a wonderful way with metaphors - I hope you don't mind if I shamelessly borrow them. I'm relatively new to AIM so I can only speak from limited experience, back testing and throwing simulated patterns at AIM. Your attempt to slow down the BUY side is interesting. IMO, a side effect of AIM's 50% portfolio control increase on a buy is to nudge it toward buying even more. It's not dramatic, but there is somewhat of a "snowballing" effect as AIM buys into a declining stock. RE your frequency-adjustment mechanism. I have a hard time accepting that putting a blindfold on AIM is the best way improve it's reaction to price movements. I also think it would be psychologically difficult to stop the normal update period and then watch the stock gyrate through one or more excellent AIM-sized swings while AIM is in the corner having a month- or quarter-long timeout. In particular, if the stock stops declining and reaches what would normally be a SELL price, do you resurrect the old update frequency? This illustrates the need a corresponding rule to terminate the reduced-frequency update. If you're peeking at the stock in between updates looking for events that change your plan then you haven't really reduced the update frequency. I adopted a different mechanism to slow down the buying in an extended decline which I call the WAIT percentage. The first buy occurs BTB, but the subsequent buys must be at least WAIT% below the previous buy. An additional twist has the WAIT% decay to zero over a period of a couple months so if the decline flattens out and AIM still wants to buy it eventually will be able to. The net effect is that AIM spends it's petty cash right away but I impose more restrictions when it wants to dip into the savings account. I actually use the WAIT% on both the buy and sell side. AIM returns aren't very sensitive to to this parameter and I've found that a generic WAIT=10% doesn't impact normal AIM functioning but improves the return of every stock I've tested that has had an extended rise or fall. Those conditions are the ones that I'm targeting with this parameter. As with all AIM adjustments, there are situations where this will reduce the return and it's yet another risk vs return trade-off.

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