Replies to post #28965 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

The reason I ask Tim is because of trading costs. The more frequently you trade the higher those costs.

When in an inner price range zone two things can happen. Either the price trends quickly to one of the edges of that zone or the price stays range-bound within that zone for an extended period of time. For the latter using an inner ladder is generally the more rewarding as you capture multiples of smaller trades/small gains as the price bounces around. The former is better suited to not having laddered that inner range as you in effect cost average in multiple smaller (inner zone) ladder steps into a larger single trade.

In concept under random walk conditions the two should counterbalance over time - excluding costs. When costs are considered then there's an apparent bias to having used the less frequent larger trade size approach.

There's a balance. Trade too frequently and costs detract from rewards. Trade too infrequently and you're not capturing as much volatility as you might. With the fixed step ladder and trading at fixed time intervals you in effect fix the trade rate.

Best. Clive.

[lionhead0]

Hi Clive, Re: LRS

The LRS's can be made on any long term, monthly, intermediate, weekly, short term, daily - quarterly. Your suggestion of a ladder inside a ladder then would optimize the use of one's cash. While always having upside/downside targets and ranges to work with. This also gives the investor a time perspective of risk/reward and investment horizon if needed. The Big Picture is always available to view.

The advantages are numerous, as the market determines it's levels over time and short term noise is filtered out on the longer term LRS's. I like your ideas about the allocation of cash within each ladder. Once the levels are determined, then those are plugged into the spreadsheet to calculate the cash reserves as with the linear horizontal ladder. This is an advancement of the original idea that everyone can see and easily understand.

I'm asking folks that are layman to TA or math studies to see if they can grasp the idea. So far, the results are positive. Others here can express their comments if they understand the basic concepts.

Best, Tim