Hi Karw,
In your response to Lou you have hit exactly on the problem of trying to have your cake and eat it too(the solution is to get two cakes, eat one and keep the other to have it).
You point out precisely the dilemma of dealing with the unknown systematically. Running out of cash on the downside is not a problem at all..it means that you have invested on low stock prices. The problem would be not spending the cash!! If you wait for the big kill at the bottom you may well miss it completely as the stock may rise very quickly. If you adjust you system for fewer Big Trades then this will only profit you if the big dips occur.
Suppose you set the Buy/Sell Resistance at 30% of stock value and the stock cycles happily at an amplitude of 25%. Then you miss all the nice dips and crests, and the system acts as a Buy & Hold system. If you set the trades at 5% and the stock dives then the big dip is missed... There is no answer to this dilemma. But one thing is certain: with a reasonably low Buy/Sell Resistance you at least are able to buy on the dips and sell at the crests. That the setting is not optimum does not matter. As long as you are trading and the stock is solid you will make a profit.
I like to quote some unknown wise guy: "With investing the only mistake you van make is not being in the market."
So, go ahead and get into the market and then try to feel its vibrations...the stock behaviour will tell you when to raise the Trade Sizes or when to lower them. Being ridged on low or High Buy/Sell Resistance can be very damaging for profit making. This is why the name minimum trade should only be applied to prevent high trading cost and the name resistance be restricted to the selection of effective trades in response to stock behaviour. A large resistance will prevent a fast sell-off as the stock rises and prevent a rapid cash depletion on the down side, but there is not single answer as to how large the resistance should be.
My advice is this: Do not get stuck on what the AIM suggest what you should do. Use it only as an guideline and then ignore the advice as you please. If your gut feeling is that the stock is going
to rise, do not sell anyLet the profit ride, and sell later. If you feel that the stock is going to dip more, simply wait for it to drop, then buy later.
It is as simple as that.
Conrad
