Core Position Trading Buy Low Sell High Stock Trading ETF Trading | Stock and ETF AIM Transaction Price Range Calculation

This article details using the Price Range Calculation feature of the AIM Stock Market Transaction Calculator Program to determine which of the many price/quantity lines calculated and displayed by the program to use.

When you enter in a price, the calculator will show you if a potential transaction is "allowed" or not.  Whether it is allowed or not depends on your Portfolio Control (PoCo) and your SAFE and minimum transaction requirement settings.  (The minimum transaction requirement settings can be a fixed dollar amount or a percentage of PoCo, stock value, or total value.  "Classic" AIM uses a fixed dollar amount.  All those settings can be different for Buys and Sells.)

If the transaction is allowed, you will be shown the appropriate number of shares for that price.

Also if you want to know what the next possible Sell and Buy prices are, and the corresponding quantities, you can get that with a simple click.

Now, the question is, while AIM may say a transaction is permissible, do you really want to take it or not?

I have discovered that if you take every little transaction allowed, up or down, as soon as possible, pricewise, that it is quite likely that you will LOSE money.  That is, transacting with small percentage moves is a problem.

Now, Lichello's real-life examples, if they don't show a profit, at least show much better performance than just buying and holding the index or fund.  Those examples had modest price moves, leading to modest gains or minimal losses.  His 10-4-10 example (the $1,000,000 example) shows spectacular results.  Why that happens is that there are HUGE percentage price differences between transactions.

I call a Buy after a Sell or series of Sells a "reversal transaction".  A reversal transaction is also a Sell after a Buy or series of Buys.

The AIM hold zone, defined by the SAFE and minimum transaction settings you've made, "enforces" a given percentage move for a reversal transaction.  I don't regard the reversal price differences as a problem.  If anything, the price move required for a reversal transaction is too large.  The problem comes with subsequent Sells after making a reversal Sell.  And with subsequent Buys after making a reversal Buy.

My thought is that I want to take advantage of a sideways market by taking as many reversal transactions as possible.  I would like to take reversals of as little as 10%, so I have arbitrarily set a minimum price difference required of 10% for them.  Rarely, though, does a transaction, for me, occur that "soon".  Because of account size, reflected in the value of PoCo, and the SAFE and minimum transaction amounts, the actual percentage difference between the last price and a reversal transaction can be quite a bit larger.  Nevertheless, 10% is my minimum difference for a reversal transaction.

Now, to the subsequent transactions.  You will note that AIM will frequently give you another potential Buy after a Buy or a potential Sell after a Sell at a price at or very close to the last one.  That could happen on the same day.  If you take that transaction, that would not be good.  Lichello did his calculations on a monthly basis.  So if he bought something at $10.00, he did not buy more at $10.00 or $9.90, whatever, that day.  Next month, he would.  But likely the price would be different, so he would buy more at a lower price, or possibly sell some back at a higher price.  If the price did still happen to be the same or close to it, that would likely be an indication that a bottom of some sort had been reached, so a Buy would be OK.  On average, that made the price percentage differentials sufficiently large to show good results.

See the
"Residual Effect - Buy" and "Residual Effect - Sell"
examples below.

Lichello did his calculations on a monthly basis.  Thirty or so years ago.  Before personal computers.  Now, with programs like mine, you can do thousands of calculations a day, and possibly dozens of transactions (if you have a whole lot of "AIM accounts" and a whole lot of personal energy).

So, it is tempting to take the next possible transaction, another Sell just 5% higher than the last Sell, another Buy just 5% lower than the previous one.  Bad idea.

While I do want to take reversal transactions as "soon as possible" percentagewise, I want to wait for larger moves for subsequent Buys or Sells.  I want to take as many trades as possible in a trading range.  I grant that most trading ranges seem to be narrower than the range that AIM allows between reversal transactions, but that is what I am looking for, if possible.

Then, when the price breaks out of a range, I don't want to sell too much too soon, nor buy too much too soon.  So I ARBITRARILY set a requirement that the first Sell after a reversal Sell has to be at least 15% away.  And the next and subsequent Sells have to be 20% away from the most recent one.  Similarly the first Buy after a reversal Buy has to be at least 15% away.  And the next and subsequent Buys have to be 20% away from the most recent one.

Note that while in a series of Buys, the next possible Buy could be 20% from the last, but if the price rises a bit, a reversal Sell could be triggered at as little as the reversal percentage of 10% I've set, from the last Buy.  Similarly for Sells.

I enforce these percentages, 10%, 15%, and 20% on both the actual transaction price and on the NET price that my program calculates recursively for the NET price, quantity, and COMMISSION.

I have, for myself, one more requirement, and that is that the dollar amount of the transaction has to "make sense" to me, given my account size.  The "$ diff" column of the Range Calculation screen shows the dollar difference, based on the NET price difference between the last transaction and the proposed transaction, times the number of shares for that proposed transaction.

If you also do that, the Sell transaction line you choose should have a positive number.
DO NOT CHOOSE A LINE WITH A NEGATIVE NUMBER in the Sell area.

The Buy transaction line you choose should have a negative number.
DO NOT CHOOSE A LINE WITH A POSITIVE NUMBER in the Buy area.

Since I have small "AIM accounts" I make that requirement to be at least $50.00 on the Sell side, and at least -$50.00 on the Buy side.  (-$49, NO. -$51, YES.)  You may want to use a larger number if you have larger "AIM accounts" or want to wait for larger moves than a smaller "$ diff" criteria would allow you.

As an aside, you could use these criteria AND add some technical analysis criteria such as delaying a Buy if the price falls through support, but buying if the support holds and the price bounces.  Whatever.  Similarly for Sells on the upside (resistance).  That would make your use of AIM much less "automatic", though.  That is beyond the scope of this article; it's just something to think about.  You might miss transactions that way, but those you do make would be the result of possibly larger moves, which would be a good thing.

See the
Worksheet and Price Range Calculation
example below.

                       RESIDUAL EFFECT - BUY EXAMPLE

                         Buy      Sell
Commission:            $7.00     $7.02
Min Trans:           $140.00   $140.00
SAFE:                     10%      10%

PoCo:               $5000.00
Shares:                  300

Next Min Buy:        9 sh @ $14.75
Net Transaction:     9*14.75 + 7.00 = $139.75
What I Add to PoCo:   $69.88
New PoCo:           $5069.88
New Shares:              309

Next Min Buy:        9 sh @ $14.52
That is only 1.6% lower than the last buy.  I insist on at least 15%.

                       RESIDUAL EFFECT - SELL EXAMPLE

                         Buy      Sell
Commission:            $7.00     $7.02
Min Trans:           $140.00   $140.00
SAFE:                    10%       10%

PoCo:               $5000.00
Shares:                  300

Next Min Sell:       8 sh @ $19.07
Net Transaction:     8*19.07 - 7.02 = $145.54
What I Add to PoCo:        0
New PoCo:           $5000.00
New Shares:              292

Next Min Sell:       8 sh @ $19.59
That is only 2.7% higher than the last sell.  I insist on at least 15%.

NEXT BUY-SELL CRITERIA

If the last transaction was a         Next Buy price diff % = 15%   (0.85)
reversal Buy:                         Next Sell price diff % = 10%  (1.10)

If the last trans was a Buy but       Next Buy price diff % = 20%   (0.80)
not a Reversal Buy:                   Next Sell price diff % = 10%  (1.10)

If the last transaction was a         Next Buy price diff % = 10%   (0.90)
reversal Sell:                        Next Sell price diff % = 15%  (1.15)

If the last trans was a Sell but      Next Buy price diff % = 10%.  (0.90)
not a Reversal Sell:                  Next Sell price diff % = 20%  (1.20)

==========================================================================
PARAMETERS FOR THIS EXAMPLE

Last Transaction (Trans) Type: _X Reversal Buy   __ 2nd or subsequent Buy
                               __ Reversal Sell  __ 2nd or subsequent Sell

Last Transaction Price:    $14.75
Last NET Price:            $15.53  ( 14.75 * 9 + 7.00 / 9 )

PoCo:                    $5069.88
Shares:                       309
"$ diff" Requirement:      $50.00

==========================================================================
WORKSHEET FOR THIS EXAMPLE

                 SELL                                   BUY
-----------------------------------    -----------------------------------

                    Percent Price Differences Required

______14.75 * ___1.10 = ______16.23    ______14.75 * ___0.85 = ______12.53
       Last                Min Next           Last                Max Next
Trans Price * (1 + %) = Trans Price    Trans Price * (1 - %) = Trans Price


______15.53 * ___1.10 = ______17.09    ______15.53 * ___0.85 = ______13.20
       Last                Min Next           Last                Max Next
  NET Price * (1 + %) =   NET Price      NET Price * (1 - %) =   NET Price


            Basic "Next Transaction" Calculation from Main Screen

Next AIM Sell allowed:                 Next AIM Buy allowed:
               _____8 @     __18.76                   _____9 @     __14.52
               Shares @ Trans Price                   Shares @ Trans Price


                 Prices Determined Satisfying All Criteria
                        (see "Review..." below)

Next AIM Sell (all Criteria met)       Next AIM Buy (all Criteria met)

__16 sh @ $_19.31         $__301.94    __65 sh @ $_12.53         $__821.45


==========================================================================
PRICE RANGE CALCULATION EXAMPLE
                                                         2007-12-17  11:35
                    AIM Stock/ETF Buy/Sell Range Calculation
                          Fixed Commission Limit Order

Stock Symbol: ...........   XXX
Qty of Shares Held: ..... #    309.0000
Portfolio Control: ...... $   5069.88
Cash: ................... $      0.00
Price Range High: ....... $     19.35
Price Range Low: ........ $     12.50
Price Range Increment: .. $      0.01
A Previous NET Price: ... $     15.530000

                                     Buy            Sell
Commission: ................. $     7.00            7.02
Min Trans (Buy) ... Fixed Amt $   140.00              --
Min Trans (Sell) .. Fixed Amt $       --          140.00
Minimum Quantity: ........... #     1               1
SAFE Percent: ............... %    10.0            10.0

-----------   ----------------   ------------------------   --------------
Buy   PRICE |  EXACT QUANTITY  |   ROUNDED QUANTITY       |    (NOTE 1)
 or   Quote |        Real(Net) |      Real(Net)  Mkt(Net) |
Sell (Trans)|   Qty      Price | Qty      Price     Order | % diff  $ diff
----  --.-- | --.--  --.------ | ---  --.------  -----.-- | ---.--  ---.--
Sell  19.35 | 16.13  18.914705 |  16  18.911250    302.58 |  21.77   54.10
Sell  19.34 | 15.99  18.901017 |  16  18.901250    302.42 |  21.71   53.94
Sell  19.33 | 15.86  18.887263 |  16  18.891250    302.26 |  21.64   53.78
Sell  19.32 | 15.72  18.873440 |  16  18.881250    302.10 |  21.58   53.62
Sell  19.31 | 15.58  18.859547 |  16  18.871250    301.94 |  21.51   53.46
Sell  19.30 | 15.45  18.845581 |  15  18.832000    282.48 |  21.26   49.53
 |
 |
Sell  18.80 |  8.46  17.970494 |   8  17.922500    143.38 |  15.41   19.14
Sell  18.79 |  8.32  17.946186 |   8  17.912500    143.30 |  15.34   19.06
Sell  18.78 |  8.18  17.921360 |   8  17.902500    143.22 |  15.28   18.98
Sell  18.77 |  8.03  17.895987 |   8  17.892500    143.14 |  15.21   18.90
Sell  18.76 |  7.89  17.870035 |   8  17.882500    143.06 |  15.15   18.82
-------------------                                  ^
       ^   /-----------------------------------------/
       |   \-- 17.09 Min Next Sell NET Price is in the No Transaction Zone
       |
       \---- 16.23 Min Next Sell Trans Price is in the No Transaction Zone

No Transaction Zone

-------------------
Buy   14.52 |  9.32  15.271475 |   9  15.297778    137.68 |  -1.50   -2.09
Buy   14.51 |  9.56  15.242548 |  10  15.210000    152.10 |  -2.06   -3.20
Buy   14.50 |  9.80  15.214527 |  10  15.200000    152.00 |  -2.12   -3.30
 |
 |
Buy   13.10 | 47.17  13.248403 |  47  13.248936    622.70 | -14.69 -107.21
Buy   13.09 | 47.46  13.237478 |  47  13.238936    622.23 | -14.75 -107.68
Buy   13.08 | 47.76  13.226564 |  48  13.225833    634.84 | -14.84 -110.60
Buy   13.07 | 48.06  13.215659 |  48  13.215833    634.36 | -14.90 -111.08
Buy   13.06 | 48.35  13.204765 |  48  13.205833    633.88 | -14.97 -111.56
Buy   13.05 | 48.65  13.193879 |  49  13.192857    646.45 | -15.05 -114.52
Buy   13.04 | 48.95  13.183004 |  49  13.182857    645.96 | -15.11 -115.01
Buy   13.03 | 49.25  13.172137 |  49  13.172857    645.47 | -15.18 -115.50
Buy   13.02 | 49.55  13.161280 |  50  13.160000    658.00 | -15.26 -118.50
Buy   13.01 | 49.85  13.150431 |  50  13.150000    657.50 | -15.33 -119.00
Buy   13.00 | 50.15  13.139592 |  50  13.140000    657.00 | -15.39 -119.50
 |
 |
Buy   12.60 | 62.53  12.711949 |  63  12.711111    800.80 | -18.15 -177.59
Buy   12.59 | 62.85  12.701379 |  63  12.701111    800.17 | -18.22 -178.22
Buy   12.58 | 63.17  12.690815 |  63  12.691111    799.54 | -18.28 -178.85
Buy   12.57 | 63.49  12.680255 |  63  12.681111    798.91 | -18.34 -179.48
Buy   12.56 | 63.81  12.669700 |  64  12.669375    810.84 | -18.42 -183.08
Buy   12.55 | 64.13  12.659150 |  64  12.659375    810.20 | -18.48 -183.72
Buy   12.54 | 64.45  12.648604 |  64  12.649375    809.56 | -18.55 -184.36
Buy   12.53 | 64.78  12.638063 |  65  12.637692    821.45 | -18.62 -188.00
Buy   12.52 | 65.10  12.627527 |  65  12.627692    820.80 | -18.69 -188.65
Buy   12.51 | 65.42  12.616995 |  65  12.617692    820.15 | -18.75 -189.30
Buy   12.50 | 65.75  12.606467 |  66  12.606061    832.00 | -18.83 -192.98
--------------------------------------------------------------------------
Note 1: "% diff" uses A previous NET price entered and the Rounded Real
       (Net) Prices.
        "$ diff" uses A previous NET price entered, the Rounded Real (Net)
        Prices, and the Rounded Quantities. See the user document for
        details.
Note 2: To prevent print line wrapping, adjust margins using WordPad's
        "Page Setup".
[Your Drive and Directory]\Data\PriceLst.Dat

This was calculated by the AIM Stock/ETF Buy/Sell Transaction Calculator
Price Range Calculation feature. The output from that was pasted into the
article draft, edited by deleting extraneous price/quantity lines and
adding a few notes, then put into the web page HTML.

==========================================================================
REVIEW OF CRITERIA AND CALCULATIONS TO DETERMINE THE NEXT BUY AND SELL

SELL:
The $16.23 Minimum next Sell Transaction price is in the No Transaction
           Zone, so forget that.
The $17.09 Minimum next Sell NET price is in the No Transaction Zone,
           so forget that.
The $18.76 Minimum AIM OK Sell price gives a "$ diff" of only $18.62,
           so forget that.
This means I have to go up the "$ diff" column to find the first row
having a "$ diff" of $50.00 or higher.  That turns out to be $53.46 on the
$19.31 row.
So, at $19.31, I would sell 16 shares, for net receipts of $301.94.

BUY:
The $14.52 Maximum AIM OK Buy price doesn't satisfy either the transaction
           or NET price difference from the last transaction, so forget
           that.
The $13.20 Looking at the "ROUNDING QUANTITY Real (Net) Price" column, we
           see that the transaction price of $13.05 gives a net price of
           $13.192857 which satisfies the NET price difference requirement
           of -15% in this case. But wait, $13.05 does not satisfy the
           Transaction price difference of -15%. Have to go down to $12.53
           to satisfy that criteria.
The $12.53 Transaction price is it, satisfying the -15% criteria AND, in
           this case, the -$50.00 criteria, with a value of -$188.00.
So, at $12.53, I would buy 65 shares, for a net outlay of $821.45.

Order the AIM "Bible" now from Amazon

If you would settle for getting rich steadily and surely (instead of trying for overnight and resulting in never), you need to read the book  How to Make $1,000,000 in the Stock Market Automatically!   by Robert Lichello.  Don't let the "hokey" title put you off.  The book was first published in 1977 and is now in its Fourth Revised Edition (December 2001).  It's available on Amazon.com for about $8.00.  [2010-04-08]

In this best-selling book, Lichello details his "Automatic Investment Management" (AIM) method.  AIM is perhaps the most popular and well-known Core Position Trading method with probably thousands of successful practitioners.  For the basics of Robert Lichello's AIM methodology, see AIM Basics.

Tags:   Automatic Investment Management (AIM),  buy low sell high,  Core Position Trading (CPT),  PoCo,  Portfolio Control (PoCo),  price range calculation,  Robert Lichello,  SAFE,  support and resistance,  technical analysis,  trading range, 

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AIM e-gold Trading Transaction Calculator

Because of actions by the increasingly out-of-control fascist U.S. Government, the AIM e-gold transaction software is no longer usable.  Regardless, you may be interested in some of the information about gold, money, and government fiat currency debasement that robs you of capital and purchasing power on those pages linked to from this section, especially in the User Document.

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