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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: aptus who wrote (15174)3/8/2001 2:28:23 AM
From: axp  Read Replies (1) of 18929
 
RE: After testing a pseudo-random selection of stocks, this algorithm produced worse results (compared to simple AIM BTB) in over 80% of the stocks tested.

I also found that it performs slightly worse in most cases, which really says a lot for AIM BTB. However, the point of this discussion is to preserve cash in an extended decline, which of course would never happen to stocks we own :-). In that case, I found it does stretch the cash and increases the chance of having reserves to act on AIM buys when the bottom is put in. Missing these buys when a stock puts in a bottom really hurts returns so taking steps to avoid this are good, whatever they are.

I'd also like to point out that if one's system is able to come up with cash when a stock's cash reserves are gone (via margin, pooled cash reserves, or borrowing from another stocks cash reserve) then you don't need a cash-extending mechanism because you'll have cash to buy on the AIM recommendations around the bottom.

I probably shouldn't have brought up the WAIT%. I haven't done enough homework to back up the idea with statistics. I'm using it because for the stocks I'm betting a significant part of my portfolio on this modification made dramatic improvements in back-testing. For example, try it with CKFR from mid-1998 till now. Relative to Buy & Hold, I get +71% with BTB and +110% with a WAIT% in place. This is for a daily update frequency at the close. With weekly or monthly updates it doesn't help as much because most of the waiting is built into the less frequent updating.
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