8 steps to build your own rule-based investing strategy

economictimes.indiatimes.com:

significance of measuring trading performance for investors. Subsequently, we delved into the calculation of the key parameters, which can aid in assessing trading performance such as success rate, average gains, and average losses. Later on, we explored ways in which investors can improve their trading performance.

We also examined how rule-based investing can help investors in curtailing their losses by eliminating emotional biases and including objective analysis. Rule-based investing is basically following a systematic approach to making investment decisions by formulating predefined sets of rules to buy or sell a particular stock or security. In this article, we will discuss the steps for constructing a rule-based investment strategy.

So let us simplify this seemingly complex task into a more manageable process.Step 1: Define the investment objective This step involves the assessment of the investor’s financial goals, risk tolerance, and time horizon. In order to align the investment objectives with the investment actions, one must clearly outline his goals such as generating short-term profits, hedging risks, or long-term growth.Step 2: Identifying core investment competencies An investor might have expertise while investing in a particular market segment or stocks from specific sectors. They can analyze their historical trades where they were able to generate profits.