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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: Evan Dimmer who wrote (4437)4/8/1998 11:16:00 AM
From: OldAIMGuy  Read Replies (1) of 18928
 
Hi Evan, I'm glad the discussion helped. Further to that discussion, it's best to set up the minimums for trading and establish that area first. The next item is then to review the Buy/Sell Resistance (SAFE) levels.

Since we're already using 5% of the equity as a minimum, every percent we use on the SAFE value increases the size of the Hold Zone. Since we still want a rational trade range, it might be necessary to adjust the Buy and Sell Resistance levels. If, for instance, after setting up the minimums you find the next buy and sell prices are beyond the 52 week Highs and Lows for the stock, then trading will be somewhat limited for that issue.

I'd suggest dropping the Resistance by one point at a time while using the What If window and the Calculate button to see what the new trade range will be. Remember, as you reduce this range, you are reducing the profit that will be earned on a "round trip" from a buy to a sell. There's a point of diminishing return on reducing the range. Obviously if there are NO trades there's no profit. We need some trades and the more the merrier until we're only trading for the government's and broker's benefit.

To summarize, first select the minimums in dollars and shares for trades with which you feel comfortable. Next do a "reality check" on the Buy/Sell range. If necessary, adjust the Buy/Sell Resistance (SAFE) levels to get the Buy/Sell range to a practical point. Just make sure that this new range is a profitable one.

Best regards, Tom
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