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

To: OldAIMGuy who wrote (14424)	1/19/2001 9:17:51 PM
From: axp	Read Replies (4) \| Respond to of 18928

I've been fairly successful investing in some high risk stocks during the .com bubble, and even though I lost a lot in 2000 I'm still much higher than I would have been had I not been aggressive. My focus has now changed to risk management for the "last mile" and I'm going to use AIM to help me get there. I've been playing with spreadsheets and trying out variations of the AIM parameters as suggested by some on this board. This has raised some questions that some of you have probably already considered. For my use, I've made two adjustments to AIM that incorporate some lessons I've learned in my investment experience and seem to work well with AIM back testing on the stocks I invest in. 1) The "let your winners run" adjustment For a stock on a steep rise, AIM tends to sell too soon. Tom "pulls a vealie" to help out, which does seems to work well. My plan, which can be used in addition to a vealie, is to place a stop order when AIM says to sell. A tight stop doesn't give up much of the AIM sell price, but if it doesn't get taken out you can maintain a trailing stop with a bigger margin and continually improve the sale price until eventually the stop gets taken out on a significant dip. Normally I don't use tight stops because I hate to get taken out of a stock I want to own, but in this case AIM "wants" to get out of the stock. 2) The "don't catch a falling knife" adjustment. During an extended downturn like we had in 2000, AIM seems to buy too quickly and uses up the cash reserve too soon. Decreasing the update frequency doesn't help because AIM is not time-based and will just make up for it by buying more (although you do get more shares at the lower price). My plan here is to take the first AIM buy B.T.B to get in on the normal ups and downs. But I want to delay subsequent buys till there has been a significant decline (10%) in the stock price or a period of time (2-3 weeks) has gone by so that it's clear the stock isn't in free-fall. You might think that the AIM buy SAFE setting handles the "significant decline" part. But I agree with those here who say that a smaller buy safe works well for AIMing smaller down moves in a generally up trending stock (I choose strong stocks to invest in, not just volatile ones). In addition, when AIM buys it bumps up the Portfolio Control and makes the next buy more likely to happen before a decline in price equal to the buy SAFE percentage. I hope I've expressed myself well enough to be understood. It's a great exercise to develop the AIM spreadsheets yourself. You can get a lot of insight into how sensitive the "machine" is to various settings and stock patterns.