Online forex trading business – 3 percent of its endowment in common stocks, a proportion presumably decided upon independently of mechanical rules.
TREND LINE FORMULAS Probably the best-known formula plan ever devised is the Keystone 7-Step Plan, shown in Chart 1. When the 7-Step Plan was first devised in 1941 by Robert Warren, the channel lines drawn on a logarithmic-scale chart of the Dow-Jones Industrial Average from 1897 to that year produced an almost perfect fit. It appeared that the upper and lower limits established by these channel lines conformed fairly well with the upper and lower limits of actual market fluctuations, and that the rate of growth of the linesâ€3 percent annuallyâ€was close to what had been the actual secular growth of market prices. The high point of 1929 and the low of 1932 were the only deviations, but this period was felt to be a freak, and not likely to occur. The channels between the lines form “zones,” and the operating principles of the formula dictated that specific proportions of stocks and bonds were to be held in each zoneâ€progressively smaller percentages of stocks in the upper zones, and progressively larger percentages in the lower zones. It will be noted that the upper and lower limits of each zone change constantly from year to year.
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