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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 (15155)	3/7/2001 1:08:24 PM
From: labestul	Read Replies (1) \| Respond to of 18929

Thanks to Tom for an excellent post. I have some thoughts on this post. To me the most important aspect of Lichello's basic system is that it removes emotion from the trading process. (The other important aspect of course is that it works!!!). Any formula based system removes emotion as long as it is followed. As a general rule I believe that one can set the parameters of a particular AIM account to suit the nature of the stock. This of course includes buy and sell safes but also includes (as I pointed out in a previous post) the frequency of trading or at least of inspections. Once an AIM account is functioning there is great danger in changing any of the settings including the trade frequency parameter. The danger is that we might be changing for reasons that are partially or even fully emotional without realizing it. I think that Tom's algorithm for changing the trade frequency on the buy side is clearly formula based and not subject to emotion. Therefore I think it is an excellent idea in theory. Is it however any good in practice? Only back testing and actual experience will tell us of course but at first glance it certainly seems reasonable to me. The one aspect of his formula that might seem strange to some is the inclusion of the cash level as a controlling parameter. This is in fact not strange. Cash level appears as a controlling parameter on the sell side in the use of Vealies. It has also always been a controlling parameter on the buy side for those do not use margin. That is once cash hits zero there are no more buys!!! Tom's formula is in effect a more elaborate version of this more basic and fundamental formula. Thanks Tom, I will be running some simulations on the basis of this formula and will report back any interesting results. Barry

To: OldAIMGuy who wrote (15155)	3/7/2001 1:37:58 PM
From: Steve Grabczyk	Read Replies (1) \| Respond to of 18929

Hi Tom: Sorry if my first response got us off track. I had said that if I adopted the cash conservation technique, I would have to do it 'in toto' since I have a common cash reserve. I then proceeded to obfuscate the dialog further by bringing up frequency (trading or inspection). I really do appreciate your thoughts on cash conservation. I sure could have used it over the last year! Of course I didn't. More due to lack of discipline (LOD) than any flaw in the system. I guess the analogy to my LOD might be: One might know the rules of driving cars, but that fact alone doesn't stop one from driving off a cliff! Regards Loddite in Lancaster

To: OldAIMGuy who wrote (15155)	3/7/2001 2:24:58 PM
From: LemonHead	Read Replies (1) \| Respond to of 18929

Hi Tom, I like the idea and will start a new folder for the subject. Back sometime ago you asked me to remind you of a past post on CGNX. The reminder showed up on the calendar today. Here it is. Message 14897824 Remind me to revisit these stocks again around March to see if they've found the floor yet! Keith@archive.org

To: OldAIMGuy who wrote (15155)	3/7/2001 3:21:33 PM
From: greg welch	Read Replies (2) \| Respond to of 18929

Tom, Great idea. I prefer the parts that make it mechanical - and not allow emotions to start running your game plan. I have played around with the old Bill Reidman Excel spreadsheet for a couple of years now and it has always amazed me how the numbers change in the various columns when you tweak the buy/sell safes after a buy or a sale. When I can see the numbers all in a row and am doing "What-ifs" with the next buy/sell price I can manually adjust the cash level to whatever percentage I like by adjusting the safe level. For a slow burn this method works great by "pushing" your next buy out a few more dollars. The real problem starts when your stock goes into a free fall. At what point do you really put on the brakes or just let AIM run you out of cash in the position. In referencing the above paragraph was I sure surprised to see my Barrett Resources (BRR) holding go through the roof this morning, plus 35% at the open. I have had a few positions where the opposite was also true and the bottom has fallen out... In Maryland they have this silly Lottery slogan: "You gotta play to win". Well in some respects AIM is the same.

To: OldAIMGuy who wrote (15155)	3/7/2001 3:22:00 PM
From: axp	Read Replies (2) \| Respond to 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.

To: OldAIMGuy who wrote (15155)	3/8/2001 6:20:56 PM
From: LemonHead	Read Replies (1) \| Respond to of 18929

Hi Tom and ALL, Re: Discussion on Rule of Thumb Purchasing. Getting ready to place this topic before the RedNeck's for our monthly meeting. I assume that if one tried this that they would have to 1st decide what the total cash was and tag it, then track it through the buying to establish when to change the buying frequency. I then assume you would stay up with this outside of AIM Software with a spread sheet or yellow pad. I also assume that this is not really for a new AIM account but more for one that is mature and cycled. If Sales are made in between the buys, then we would reset the clock. I'm a little foggy on resetting the clock? But I assume that you just climb back up the ladder the same way you got down. Keith