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

To: Dataminer1 who wrote (6690)	1/24/1999 8:25:00 AM
From: OldAIMGuy	Respond to of 18928

Hi Bill, I think the use of the stop order might be very nice if done right. When you think about it, however, that very last trade before a decline looks good on the graphs, but can be peanuts in the overall scheme of things. I've been trying to figure out where the appropriate place to use the stop order is. Maybe Jim Battaglia's studies will help determine this. If we set it at 5% below the vealie price, I think it would get filled too often because of weekly fluctuations we see in our high BETA stocks. 10% even seems uncomfortably close. When Brazil hiccoughed the other day, it would have tripped many sell stop orders. On the other hand, if we increased the range of the sell stop to say 20%, well, now we're getting into a potential conflict with the next Buy Market Order that AIM's going to want to execute! We don't want to pay commission twice in too narrow a price range - once for a sell stop and then again for a buy-back. I think the only way to really answer this is to do something similar to the long term mutual fund histories I just completed but for an individual stock. If we're able to stay near trading about 5% of our position with each order, then we're only talking about an additional gain in Cash Reserve of something less than that. If the current cash reserve is 50% of the account's value, then the total effect on Cash Reserve is only 2.5%. Total effect on profits is even smaller after we deduct the cost of the stock, the commissions and taxes. In other words, it might not matter as much as we think overall. BUT IT DOES MAKE THE GRAPHS LOOK BETTER!!! :-) The thing that bothers me is that we'll be reducing our equity holding. That's going to have a long term profit impact if we don't get a chance to buy back those shares. Remember that old joke about the guy that carried an elephant gun with him whenever he left the house? After 50 years of marriage, his wife asked him "Why do you INSIST on carrying that ELEPHANT GUN with you EVERYWHERE?" He asked, "Have you ever seen an Elephant while we were out?" She said, "NO!!!" He said, "SEE!!!!" As AIMers, we're all carrying our own elephant guns around, hoping for a disaster to come along so we can use it! Yes, they do come along! Last Fall proved that conclusively for many less experienced investors. The sell stop order seems like a good idea, but may prove to only be like adding a Derringer to our vest pocket. If the elephant gun isn't going to do the job, then the Derringer isn't going to save us! We'll have to pick a good juicy stock and see what happens when we try to squeeze this bit of extra out of it! I do feel a history done with something like your PCA Software is the only way to answer this. Best regards, Tom

To: Dataminer1 who wrote (6690)	1/26/1999 12:55:00 PM
From: OldAIMGuy	Respond to of 18928

Hi Bill, Bob Norman over at Newport Programs was quite reluctant to have anything in his program that "tinkered" with AIM's Portfolio Control (PC). He even went so far as to not have a "visible" way to adjust PC shown on any screens. However, in the "HELP" section of the program it tells how to get to the PC window and gives some different reasons why somebody might want to make a change. Bob recently noticed that the instructions on the "vealie" in his software doesn't have the name "vealie" (as Bernie G. hadn't coined that term yet!) and isn't properly defined, either. I guess that section was written back in the "experimental" stages. Either that or it was just a typo! Anyway, it says to add the entire value of the Sell Market Order to PC when in fact now we have figured it was too big a change to do that. "Modern" vealies add only 1/2 the Market Sell Order value to PC. So, your thoughts of caution about making the "vealie" automatic or easy are well founded and concur with Newport's. I feel that a vealie has to be a concious decision each and every time we do it. After all, Portfolio Control is the heart of the AIM method and shouldn't be adjusted without good reason. Best regards, Tom