A.I.M. Users Bulletin Board

[ls7550]

Hi Tim

Have I got this right?

You decide on a wide range between a ladder bottom and top. For example purposes let's say for the Dow you might pick a bottom of 4000 and a top of 16000

Within that you identify and partition a smaller price range around the current price using TA indicators. So perhaps the current TA's might indicate a top of 9000 and a bottom of 7000 and n steps/levels in between.

You then ladder that inner range (7000 to 9000) using the TA levels (n steps) for each ladder step.

The amount put at risk in that range is proportioned to the overall larger ladder, e.g. in this case the larger ladder has a range of 16000 - 4000 = 12,000, and the inner ladder spans 9000 - 7000 = 2,000, so the capital amount allocated within that inner ladder is 2,000 / 12,000 (16.6% of total funds). So at the bottom price level in that inner ladder you'll have 0% out of 16.6% cash and at the top you'll have 16.6% cash.

This is on top of what the larger outer ladder indicates. So for example if the outer ladder suggests at the bottom of that inner ladder level 33% cash is appropriate then your overall cash reserve is 33% plus whatever the current inner ladder is suggesting.

When the TA's change then you re-ladder the inner ladder to the new TA values to set the new top, bottom and steps.

Or are you using some other approach?

Best. Clive.