Hi Chip, This is sort of "off subject", but I hope nobody will mind. It does relate to how I've managed my GENE holding, and since it's not T.A., maybe it will be of some interest to others.|
AIM's a very contrarian type of portfolio management. You asked "I am not very familiar with systems trading....but does yours use momentium models and why would you sell at arbitary numbers if the monentium is up?" and the answer is that AIM's not a momentum based system. It buys as prices drop (usually from momentum players that are getting out) and sells shares as prices rise (usually to momentum players that arrived after the party started!). However, the trades are small and incremental, not all or none. I don't mean to be too smug about this. I've lost money with AIM, too, but I really have to be following a dog of an issue to the grave. That I try not to do!!
Different from T.A. or other technical based systems, AIM is for managing the risk of being involved with a stock for a long period of time. It doesn't have a "Sell All" feature included. You would have to over-ride the system to sell out of a stock. It will maintain a relatively constant risk value no matter which way the market turns. It only expands your risk envelope as it buys, not as it sells.
AIM's sort of brain dead and numb from the waist down. It's not swayed by emotional or informational news. The beauty is that it decouples information from the risk management decision. It says, "You were only willing to risk $10,000 when the stock was cheap. Why would you be willing to risk more than that now that the price is high?" Companies do change, grow, mature, etc. but as long term investors, we can't predict the future as easily as we can react to what's just happened. If your $10,000 investment is suddenly worth $15,000, AIM will ask that you take about $5,000 off the table. Then if the price/share retreats, AIM will use that nice comfy cash reserve to buy additional shares at a discount to the last selling price.
When AIM and I sell a few shares of GENE out of my account, I probably am adding slightly to the overall "resistance" to the price rising. However, please understand that I'm just reducing my risk exposure back to a previously determined point. At the other end, AIM and I act in a small fashion as a price "support" as I accumulate shares. The range between a buy and a sell (most recently, a buy in the $6 range in April and a sell in the mid $9s about a month ago) is big enough, that I don't think that I influence the market even in a thinly traded stock. Usually I'm making small inventory adjustments - maybe 5% to 10% of my holdings.
I use this AIM method on all of my stock and fund holdings. I've been using it for 100% of my portfolio for a full 10 years now. If I stick to good fundamental stock selection methods, AIM does a great job of managing the risk of being involved. Along with strong fundamentals, I look for high BETA (volatility) and good growth potential. I run my investments like a warehouse business. I inventory stocks and when demand is high, I reduce my inventory. When demand is low, I "restock" my shelves with more certificates.
The stocks here on S.I. are generally ideal for this sort of contrarian management. The lemmings go on a feeding frenzy and I supply the condiments! Then when the market momentum fades, all the lemmings leap at about the same time driving the prices down. That's when I recycle my cash.
There's a historical graph of another stock (CGNX) shown at the AIM web site
that shows how AIM manages an investment. The graph shows how the cash is used and when the trades are executed. At each point you have a new buy and sell price target for a portion of your holding. This lets you place the orders in advance and go do something else. I can't emphasize this enough. Without AIM, I was a "Ticker Addict"; now I only check to make sure that my trades get done. The time I used searching for patterns is now used to study fundamentals of new stocks and ones I already own.
Hope this helps a bit,