It is easy to create an investment strategy that suits your personality and goals. Once you have decided whether you prefer a conservative or moderate investment strategy, it will be relatively simple. Two steps are required to achieve this.
First, define your personality and goals.
How much risk will you take? There will be losses, but you can accept them. Or do you prefer to aim for big gains that could result in greater losses?
What are your trading frequency requirements? Do you want to trade every week? Or would you prefer to trade once or twice per month?
Do you want your wealth, retirement, and portfolio to grow slowly over time? Or do you want them to grow quickly?
Second, learn the strategies that can be used to make conservative investments or moderately aggressive investments.
Frequent trading is best for both aggressive and moderate investments.
Setting sell stops lower than 1% or 3% will result in more trading than those that are slightly higher.
A wider range of stocks can be traded than ETFs and many mutual funds, which will produce more aggressive or less aggressive investment strategies.
Different rules and parameters can have an impact on your results. You can also define your investment strategy as conservative, moderate, or aggressive by setting different rules in your retirement software.
a) Ranking- Setting sell rules based upon the rank of a position (ticker symbols) within your group of possible positions. A ranking in the top 10% or 5% will result in more trading, and a more aggressive strategy.
b) Stops- Setting the sell rules based upon how much a position falls from its highest point can result in increased trading frequency and churning.
c) Hold rules- Define your strategy by saying that you prefer to hold positions for 10 days or less, instead of 30 or 60 days. This is your strategy for aggressive vs. conservative.
d) A Market Exit signal is based on the equity curve performance of stock markets. It can help you know when to stop trading or cash out. This will protect your money from potential losses. Setting this signal for a shorter evaluation period than a longer one can have major consequences. Too long will result in you not receiving a signal in the time you need to avoid major loss. However, too short will lead to you trading again too often.
e) The Period of Analysis – When you analyze your potential funds, ETFs, or stocks, the chosen time period will determine the type and investment strategy. Shorter periods of analysis, such as 10 days, are more conservative and will require more trading.
These factors are not as daunting as they sound. Safe investing and defining your investment strategy is possible when you realize that you have complete control over the parameters. You should back-test to ensure that you have the settings you need and desire in your investment software. However, you can customize the analysis testing to fit your criteria.