Hi Funken,
The AK 55 is a great receiver. I had the table top "coffin" version of that set. The third knob is a local/distant switch. It is used in the distant position to give more amplification so you can receive stations at a distance. In the local position the amplification is not as great so that local stations don't come booming in. That set was made to use a length of wire for an antenna. Usually a 10 foot piece will be sufficient but the longer the better.
I downloaded the instruction manual for this set at one time but I don't remember where I got it. I have uploaded it here:
Atwater Kent 55 Instructions