Kast, I think you might be mixing up a few things:
. . . Also, what % are you using for minimum transaction? I know Lichello experimented with 5% and 10% before settling on 10%. Obviously 5% will trigger more transactions, but I'm wondering if the 10% recommendation still holds true...?
The AIM Trade Advisor will in the first instance trigger a trade if the price change of an equity exceeds the Holding Zone (HZ). This can be 1% or 5% or 10% or 20 % or more, and this level depends on a lot of things. For example, for currency trading I tend to advise 1%. . .For highly volatile equities it is the Trading Range that will determine the HZ.
The Minimum Transaction(Trade Size). . .(MT) comes into play only after the HZ has been passed and 1) is a function of the trading cost and 2) is a percentage of the Equity Value. . .If you have a large equity position and a reasonable HZ then any trade advice is likely to exceed a practical MT. . .then a 0% MT does not increase the number of trades. . .The HZ will determine the number of trades!
If however you have very small equity position, say $ 1000 and use a 10% HZ a Trade Advice could be in the range of $ 80 to $120 or so( depending on SAFE-value used) . A trade order like that could cost $ 10 or even more. . .that is far too high for a trade. . . .you would want to look at trading costs of 1% or less of the trade value . . in this case in the range of $ 1. . and the $80 trade would be 8 % of the Equity value. . .a reasonable MT percentage. If your equity position is $ 40000 the trade value would be in the range of $ 3200 and for this amount the trading cost are maybe $10 or 0,3 % and the trade of $ 3200 is also 8 % of the equity value. But you might easily trade at $ 1000 and that is 2,5 equity value. So a MT of even 2% mat be OK in this case.
This means: As you lower the HZ the trade advices may approach a reasonable minimum amount below which you pay too much for the transaction. If you then set the MT too low you are increasing the number Trade Orders and if you do not know what the trades are costing you could be trading yourself into loss with an equity that is potentially a Profit Maker. Do not hold onto arbitrary rigid MT figures that you do not understand. . .ask yourself: “How much does a typical AIM Trade going to cost me? If the answer is “Too Much” then raise the MT till you are happy with the trading cost.
Look at it this way: If a typical +/- AIM trading cycle gives you a trading yield of $ 20 and the In-Out trading cost = $ 25 then it is obvious that the MT is far to low and should be adjusted upwards so that your profit per +/- cycle is at least enough to be “happy about”.
