How to Control Trading Frequency

You don't have to trade every day or even every week if you don't want to trade frequently. You can control the amount of time and frequency you trade ETFs, stocks or mutual funds. By following just a few principles you can be in charge and still make money in the markets.

Using technical analysis as a way to decide when to buy a stock, or ETF, or mutual fund can allow you to change the parameters or rules for when a new buy is suggested. The same analysis with some software programs will tell you when to sell a position based on rules you define or that the program suggests.

There are anywhere from two or three to perhaps as many as ten different buy sell rules you can adjust which will allow you to control the frequency of trading. In this way if you only want to look at the market once a week or every few weeks you can do this and still enjoy substantial profits.

The key factors or rules you can control can also be back tested or optimized by some software programs to give you the best results with the groups of symbols that interest you.

Here are the key factors that you can control:

? Analysis period - when analyzing momentum you can set the period of analysis (on a continual basis) for anywhere from 5 trading days upward. A shorter period of return will react more quickly to market volatility and result in frequent trades whereas if the period of analysis is long, like 90 trading days there will be fewer trades.

? Stops - trailing stops that give a sell signal when a ticker symbol drops from its high can also affect the frequency of trades. If the stop is set at 3% there will be substantially more trades than if it is set, for example, at 8%.

? Hold time - some software programs will allow you to specify desired hold times and while they may be over-ridden by stops or other selling rules, a longer hold time will also reduce the number of trades. For example if you have no hold time then trade signals can occur any time but if you have hold time signals of 30 or 90 days there will be fewer trades unless a stop signal is generated. This is also important if you are investing in mutual funds as it helps to avoid short-term trading fees.

? Chart settings - how you set the parameters for different charts can equally effective a charts signal to buy or sell. For example, a moving average chart with settings of 10 fast and 50 slow is going to produce more signals than a chart of 20 and 60 or a chart of 50 and 150.

These are but four ways you can control the frequency of trading in your investment portfolio and thus control the amount of time you spend managing your investments. It may be true that gains will not be as robust if you trade very infrequently but that doesn't mean your account will not grow, it just may not grow as much as someone who looks at their investments daily instead of once a week.

Source: http://ezinearticles.com/6276347

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