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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Philip Ng who wrote (14013)	12/20/2000 10:17:57 AM
From: OldAIMGuy	Respond to of 18928

Hi PN and Welcome to the AIM thread, You may want to look at aim-users.com for some clues on adjusting SAFE and also as you mentioned "AIM tends to throw off too much cash on bull runs" my 'vealie' might help. SAFE adjustment really is dependent upon the investment vehicle being used. Diversified mutual funds benefit from a smaller total SAFE value by becoming more active in trading. However, individual stocks with high volatility ratings might do well with the total SAFE range being expanded beyond the traditional 10% for buying and selling that Mr. Lichello first recommended. There are several here who have spent time with adjusting AIM's Hold Zone via SAFE changes. I hope they will chime in. I've no rule set for such adjustments. Once I'm comfortable with a stock or fund that I'm AIMing, I usually pick SAFE values and leave them alone. The exception was last Spring. Watching my investments soar with no matching fundamental improvement made me queasy. I expanded the SAFE values to the Buy side and in many cases also eliminated the Sell SAFE. I then had to change my Portfolio Control values to keep the trade ranges about the same. As we progressed into the bubble I further pumped up the Buy SAFE. Many of those settings are still in place. You can see them on each investment at aim-users.com I believe all the SAFE settings are correct even if the graphs are not all current. The very low SAFE settings for selling are compensated by my use of a ceiling on the Cash Reserve for each investment. In essence I'm now using my 'vealie' as the final resistance to selling in a rising price environment. I'll sell as AIM says up to the point the cash reserves satisfy the current target that the Idiot Wave is suggesting. The IW is built for the US market, so I'm not sure it will have application for your local markets. Thanks again for joining in. Happy Holidays, Tom PS: how's your weather there?

To: Philip Ng who wrote (14013)	12/20/2000 6:04:11 PM
From: aptus	Read Replies (1) \| Respond to of 18928

Hello Philip, I've done some research into SAFE settings and I've come to the following conclusions (which may change as I continue to research AIM and its myriad of possibilities). 1. Changing SAFE settings based on current market conditions is not such a good idea. AIM is meant to be a non-emotional mechanical system that derives all the information it needs to function from the stock price changes in your portfolio (after everything has been initially set up of course). It does not try to predict the next price, rather it reacts to it. Therefore if you change the SAFE settings based on how you or some analyst, talking head or cab driver feels about the current market, you are (1) introducing emotion into the system and (2) trying to predict the next price. For example, at the end of last year many thought the markets would rise by leaps and bounds for a very long time. If that was you, you might have been tempted to lower your buy resistance and raise your sell resistance. But that would have been the wrong action based on what happened from April to today. Of course if the specific company you hold in your portfolio changes its characteristics, then a SAFE setting change is warranted. Which leads directly into point number two... 2. My feeling is that different companies behave differently and there is not a one size fits all 10/10 SAFE setting. Robert Lichello did not have a smidgen of the resources and computing power we have today, so he did the best he could. I believe that if he had the tools of today (see automaticinvestor.com -- shameless plug ;-), he would have come up with alternative SAFE settings based on stock price characteristics. Somehow I don't buy the fact that RL came up with the ultimate SAFE settings for all stocks using a pencil and paper and limited access to stock price data. I think (and the historical testing I've done supports this) that stocks can be classified into general categories (based on the frequency and amplitude of its share price changes). Once we've determined the characteristics of each category, we can tune AIM to take advantage of this. Again that's why Automatic Investor (another shameless plug!) introduced models. That being said, mapping stocks into various categories is a bit more difficult than you might think. But I'm firmly convinced it will give better results. If you'd like to experiment with this send me a PM and I'll be happy to let you know what I've done so far. Once you've set SAFE, however, you should leave it alone unless the company reinvents itself and its stock price characteristics change such that it is put into a different category (for example Seagrams moved from a pure alcoholic beverage company to a large entertainment company after purchasing most of Universal Studios and other companies). 3. One of the things I've never been completely comfortable with when using the 10/10 SAFE settings (or any X/X setting for that matter) is that there is a built in tendency for stocks to rise over the long term (the good ones anyway) so I think the SAFE settings should reflect this. I would use an X/Y setting where X < Y. As to the exact values of X and Y, well that's the (literally) million dollar question. 4. I've also done some work with using technical indicators to dynamically change the SAFE settings and so far have been quite unsuccessful. Basically I've come to the conclusion that if I can find a good indicator (or set of indicators) that can be used to dependably adjust the SAFE settings, I might as well just use the indicators directly and forget about AIM. So far that hasn't happened. However there is one area where I've had some success and expect much more in the coming year. And that's with using volume as well as price to determine AIM's recommendations. I've always believed that there is information inherent in the volume as well as the price. Therefore reacting to price only, effectively throws away useful information. I'm currently researching a way to use the volume. Of course this enhancement, if it ever comes to light, will have to go under the heading of AIM derivatives. So far I've been able to beat AIM (price only) results over 90% of the time when adding volume information and running historical analysis. But there's still much more work to be done here and I've only just begun. If anyone out there has any suggestions on this, please let me know. Anyway, I hope this helps and welcome to the board. regards, mark.