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Strategies & Market Trends : AIM Questions and Answers -- Ignore unavailable to you. Want to Upgrade?

To: THE FOX who wrote (213)	11/30/2001 10:51:10 AM
From: OldAIMGuy	Respond to of 221

SAFE Values.... Hi FOX, Mr. Lichello's original SAFE was always a positive integer, +10. With Split SAFE, we have the choice of changing the value of both the buy and sell portions of SAFE. Increasing SAFE on either side will increase the range from the Portfolio Control (PC) value to the first indicated trading activity. The opposite is also true. Decreasing SAFE closes the gap between the PC value and the first indicated trade. Now, to carry that to yet another dimension, you can reduce SAFE to zero or even go to a negative number. I advise caution when trying this as there's effects that range beyond just the very next trade. Zero SAFE will reduce the gap to the first recommended trade to being only determined by the size of the minimum order. For instance, if you are using 5% of the equity value as your minimum, then the value of the equity will have to be slightly more than 5% different from PC to get a trade recommended. Negative SAFE actually starts to eat into the gap between PC and minimum order size. For instance, if you were to set SAFE at minus 5% and you were trading 5% as the minimum order size, you would essentially be getting a recommendation to trade at very near the PC value. Carrying Negative SAFE to an extreme, you would find that you could potentially have a Buy price higher than your next Sell price! This would be formula for loosing money, obviously. When testing Negative SAFE on the Buy side, use Newport's "What If" window. Put in varying negative values, slowly increasing them. Notice when the first "Buy" recommendation comes but also notice the second line where it shows what the new "Hold" zone will be after that transaction. The subsequent Buy will not be far from the previous price. Two things are happening here. You are making a bigger buy, sooner because of the negative value. Because this affects PC, there's a snowball effect. Carry this to an extreme value and you'll see what starts to happen. Bob Norman when he wrote the program considered blocking the ability to have SAFE go to negative values. However, he decided to leave that pandora's box available knowing that many people like to experiment and also use this program for things other than traditional stocks. Best regards, Tom