How to Add Momentum To Your Trading Strategy
A good way to accelerate your accounts profit taking, even in slow periods, is to add new money to your trading strategy. The practice is known as 'Dollar Cost Averaging'. Dollar Cost Averaging is an investment strategy where the investor keeps adding a fixed dollar amount on a regular basis to an already active strategy.
Dollar Cost Averaging Using Smart Auto-Trading
On Smart Auto-Trading, Dollar Cost Averaging can be achieved 2 ways. The first method consist of increasing trading capital. The new capital will be used to buy more shares which means that a smaller price difference will be required in-market to produce the same profit target specified in your trading strategy.
The other method relates to opening a new trading slot. To open a new trading slot, the investor usually adds new capital in proportion to his current trading capital divided by the amount of stocks he has in-market. For example if the investor has a trading capital of $25,000, divided by 5 trading slots, each trading slot trades a stock with a budget of $5,000.
Adding $5,000 in new money to the existing trading capital and adjusting 'In-Market Stocks Limit' from '5' to '6', will open a new trading slot with $5,000 to buy a new stock for the strategy. When the investor does this, the newly added trading slot goes to work immediately, creating momentum to his strategy.
Creating momentum can make a big difference in the performance of a trading strategy. For example, if your strategy has '5' trading slots and '3' of these are not producing due to slow moving stocks, you are running only on '2' trading slots or 40% of your strategies' maximum efficiency.
By adding '1' more trading slot, all the sudden you are increasing your strategies' efficiency to 50% and are trading more than you were the day before. The new slot is providing renewed momentum, keeping the strategy active and allowing non-producing trading slots to recover in the mean time.
If you keep adding trading slots over time, you are creating momentum while diversifying your trading roster. Since trade momentum is key to create profit acceleration, adding trading slots is a good way to keep profits coming at a faster pace.
Working towards self-sufficiency
Now that your strategy is keeping its trade momentum high, you hold the potential for your strategy to become self-sufficient. Essentially, you have the potential to reach a level of trade momentum that enables you to reinvest your profits on a regular basis.
By using the Dollar Cost Averaging method, you are growing at a faster rate, resulting in even higher trade momentum. Once this acceleration has materialized, your strategy will be growing in a self-sufficient manner, possibly eliminating the need to inject new trading capital.
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