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

To: JZGalt who wrote (5012)	7/12/1998 12:17:00 AM
From: RFH	Read Replies (1) \| Respond to of 18928

JZ; Regarding your table in posting # 5012, should I assume that your initial investment of 10K per stock meant 7.5K for the shares, and 2.5K in cash? Also, do the AIM results include the sum of stock and cash? It wasn't clear in the table, but I realize that you are working under some space constraints when posting a table on this discussion board. Thanks, RFH

To: JZGalt who wrote (5012)	7/12/1998 6:15:00 PM
From: Bruce A. Bowman	Read Replies (2) \| Respond to of 18928

Hi Dave- I assume that all the 7/8/97 numbers are really 7/8/98 (last Wed.). Generally you should see improvement over b/h anytime you use AIM given a broad enough period for the comparison. The advantage swings the other way when you compare the 2 using a stock that seems to go up endlessly. Then b/h will be the favored approach (unless you do something to compensate AIM like continue to apply "vealies" which is essentially like using b/h). To get into the right type stock for AIM, it's best to use a measure of beta. Ideally you'd like beta >= 1.4. A stock that appears to move around a lot on a chart may not have high beta when measured using one of the standard methods. I prefer the method that plots pairs of data (stock $ change on Y-axis vs. S&P 500 $ change along X-axis), then plots a linear regression line through the resulting scatter diagram. The slope of that LR line is beta and the offset through the vertical axis is alpha. With beta >= 1.4 and alpha positive (intersects the Y-axis above the X-axis) you should have a stock that moves more than the S&P 500 index and generally moves up independent of the index. If you go through all 9 of these stocks, you're probably going to find that some are less ideal than you'd like. That doesn't mean you can't use AIM, only that the returns aren't going to accumulate as rapidly and the trades will be less frequent. The concept doesn't change because of volatility of the stock relative to the rest of the market. The spreadsheet that I sent to you was what Bill Reideman created (with the .txt file). I have a variation of Bill's s/s that I have played with that automatically adjusts the minimum trade as a function of Portfolio Control (PC). Initially I tried using Account Value (AV) and saw that the recommended buy/sell changed daily. I chose to use PC instead of AV because it's more stable, only changing when you make a buy. You may find that a useful incorporation into your own version which will allow you to set limit orders without having them change daily. The draw back is that 5% of PC can be substantially less than 5% of AV in a strong bull move. You would need to do some research to see what fits your needs. The whole purpose, of course, is to allow hands-off trading through the use of limit orders which introduces a detachment necessary for non-emotional trading. In setting up buy/sell resistance (SAFE), I'd suggest not working too hard at setting the buy or the sell to hit the exact low or high. That type of setting is too optimized and will cause disappointment in the the long run. I've tried resetting the values from plain vanilla and found that I was doing more setting than trading and finally put it aside in favor of 10%/10%. I've missed a few trades on some stocks because of doing that, but I think MFs + stocks with lower beta values probably benefit the most from non-standard settings of buy/sell SAFE (resistance). PC has been an elusive parameter in the AIM algorithm. A few have tried to play with it including Bill Riedeman, but I haven't heard of an approach to incorporating adjustments into trading. Sorry... don't know af any references. Just went thru an extensive search on Alta Vista and came up with all sorts of interesting things, and not one was related to Mr. L's version of AIM and portfolio control. Bruce