AIM UK

[ls7550]

Hi Tim

Also, devising a spreadsheet, or simple calculator, that is a template rather than a fixed design so individual levels can be inputted with specific levels of cash as the output. As I've shown on your board, each tradeable moves along to a slightly different "beat."

One could further subdivide the levels, but that would end up with too much trading. The major levels are the ones to be concerned about and moving past them up or down is the way to view it I think.

I'd like to see that spreadsheet/calculator once your done if you don't mind sharing.

I can see the appeal of using manually defined ladder price levels as our minds are pattern recognition based. However I believe that the additional time/effort spent looking and setting manual levels over that of more simple fixed levels does not provide sufficient additional (if any) benefit to warrant that time/effort.

Here's an auto generated chart showing some support/resistance lines for the UK's FT100 1984 to present.



Use a log scaling and you'll get another different set of S/R lines.

Market prices are the collective average of everyone with an interest in either buying or selling. That collective average changes over time. Yes the more people that follow one particular indicator the greater the chance of that indicator being reflective of actuals, but in times such as more recent when uncertainty/potential (greed/fear) predominate then volatility will be high as the collective do not know where to price stocks. Once a more common agreement forms, then volatility will decline.

If you have price appreciation, price volatility capture and downside loss limitation components separated out (B&H, Ladder, MF) then I would suggest that instead it might be better to expend time/effort looking into over/under weighting which style you might predict as the better/worse going forward. Alternatively you might just react to what actually occurs and periodically rebalance the three back to near equal proportions.

Simple time diversified price levels is likely to fair as well as attempts to trade to support/resistance lines at the Ladder level. Periodic rebalancing to equal weightings across the B&H, Ladder, MF styles is likely to fair as well as attempts to predict which style might provide the better return over the short/mid term.

I opine that stocks price moves are to a large extent random, but equally are bounded with certain limits of mass greed/mass fear. Structuring your Ladder boundaries to historic levels of fear/greed, perhaps as depicted by dividend yield (or some other time independent measure) will help ensure that your ladder remains active across time, rather than encountering periods of prices being outside of the ladders range.

Best regards. Clive.