A.I.M. Users Bulletin Board

[Adam]

Hi Daisy42, I commend you on thinking about how to set the SAFEs. One of the early improvements to Lichello's Safes was to split them into Buy and Sell.

I've also toyed with trying to optimize the Safes by looking at ZigZag analysis. However the whole discussion of Safes really has to do with the Hold Zone, which also depends on the Min Trade. So now I look at the Hold Zone percentage which is defined as follows:

I work out the upper value of the hold zone= U (above that I sell)

and lower value of hold zone= L (below which I buy)

Hold zone %= U-L/( (U+L)/2 ) * 100

in other words I work out the mean of U and L and work out the Hold zone percent of this mean.

Generally I want this to be 20% for ETFs, CEF, and mutual funds and for non volatile stocks. And close to 30% for volatile stocks.


My initial settings are in general SAFE=5% and min trade 10% which gives a hold zone of about 20%

The other factors in setting this are personal. For me it's rare that I'm setting up a new AIM program because I already have too many and am trying to prune. So in general those programs that I don't like anymore I lower the Sell Safe and increase the Buy Safe. I also don't hesitate to make the Sell Safe negative.

For example in one of my stocks my Buy Safe is 30% and my Sell Safe is -10%.

It also depends on my relative cash percent. If it's high I'll decrease the Buy Safe on an ETF I want to buy more of (adjusting the Sell Safe to maintain the Hold Zone %)

Adam