A.I.M. Users Bulletin Board

[karw]

Hi All RE: adaptive safe settings

In some of my machines I use/experiment with adaptive safe settings in this way:

Take the PC/share as the anchor point.
Use 1 * sigma for the deviation from the anchor point, so that is Minimum Buy or Sell plus Minimum Transaction size.
Sigma is determined by using the price time series, using the standard deviation in excel.

Then the formulas :

Buy safe: S% = 1/(1-sigma/PCsh) - MB% - 1
S% = safe percentage
PCsh = PC/share
MB = minimum Buy percentage

Sell safe: S% = - 1/(1+sigma/PCsh) -MS% + 1
MS = minimum Sell percentage

When determining sigma you should not use a period that is too short. I think 2 years is short.

The values obtained scatter around 10% dependent on the volatility of the ETF. 10% seems to me a good average default value.

Kind Regards,K