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

To: THE FOX who wrote (14211)	1/4/2001 9:58:45 AM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi TF, Newport along with all the available AIM software looks at Portfolio Control to make decisions about where buys and sells are made. In essence there is a "...look at the history of buys & sells and indicate the next sell..." in that Portfolio Control is adjusted to new levels with all buys. So, if you set Sell SAFE (or Sell Resistance) at 20%, that is the premium above your Portfolio Control (PC) value that must be satisfied before AIM will give you any Sell signal at all. Let's say that PC is 10,000, then the value of the portfolio has to rise to at least $12,500 before AIM will start to think about giving a sell indication (10,000/0.80). It then must rise high enough above the $12,500 mark to satisfy the size of the minimum order selected. Now, let's assume that the portfolio rises to $14,000 in value. To get the size of the Sell Order, first we subtract 20% from the value or 14,000 - 2800 = 11,200. Next we would subtract the PC value of 10,000 or 11,200 - 10,000 = $1200 market order to sell. If our minimum trade size was $1000, this order would satisfy that requirement, too. So, we'd sell $1200 worth of our equity. NOTE: We've not ever mentioned price per share! That is not a factor. Only the comparison of total equity value to Portfolio Control counts in the AIM game. In our example, any time the portfolio's equity value returned to something around $14,000, AIM would trigger a $1200 Sell order. This might be a $0.50/share price change on a low price stock or a $5.00/share price change on a higher priced equity. So, a 1:10 reverse split would change nothing just as a 10:1 split changes nothing. It's all based upon total equity value in the AIM account. Let me know if this answers your question. I think what you were thinking is that SAFE acted like a scale. Every 20% rise in price would trigger a sale. Scale trading is different from AIM. AIM contains the amount at risk to within the SAFE ranges around Portfolio Control. If the amount at risk rises, AIM sells, if it falls, AIM buys. Best regards, Tom

To: THE FOX who wrote (14211)	1/4/2001 11:18:55 AM
From: Bernie Goldberg	Respond to of 18928

Hi, For starters and with the danger of repeating myself, AIM is a formula for risk management. At the outset you tell AIM how much money you want to have at risk in a particular issue, or group of issues. That number is your Portfolio Control. When you set you Buy/Sell resistances you are telling AIM where you want your bias to be. Mr. L. recommends 10/10, you like 0/20. Either one is fine. The difference, or spread, in both cases is 20 which represents the LIFO profit on minimum orders, 20%. Let us assume you started your investment with $10,000 in stock. Your Portfolio Control would be 10000. You have told AIM that $10,000 is the amount you desire to have at risk. By setting your resistances at Buy=0 Sell=20 you are setting up AIM with a bias to buy quicker and sell slower. Since you have gotten a sell order from AIM which you executed, I am assuming that the value of your holding increased to about $12,000. AIM looked at that and said WHOA....you want to have $10,000 at risk and it is now $12,000. Let's sell some of that to get you closer to $10,000. That's the first sell. It doesn't take you all of the way back, just part of the way. Now, three things can happen. 1. The stock goes nowhere and sits idle for a period of time. 2. The stock goes down. 3. The stock goes up. In a strange kind of way does not look at the price. It looks at the original amount invested. This of course is determined by multiplying the price by the number of shares. When your holding once again reaches the magical number of $12,000 AIM will tell you to sell some more. Your portfolio control will not change until you get a buy signal from AIM. You see the money you got from your sale is yours. It is a return of capital at risk. If you use it to buy more shares you are increasing your exposure to the risk of the market. When AIM tells you to do this you increase your Portfolio Control by 1/2 of the amount invested. The resistances are calculated in both directions from the Portfolio Control. Mr. Lichello calls it the Commander in Chief. If this is not clear to you, you might try reading Chapter 6 of Mr. L's book starting on page 44. Hope this helps. Bernie in Gunnison Clear skies and 3°