Diversification is a way of managing your risk when investing. By investing in a variety of stocks rather than just a few, traders can limit their overall risk when trading equities. A diverse portfolio contains a mix of various investments spanning many different characteristics and risk levels. Studies have shown that a portfolio of about 25-30 stocks holds the best balance for risk management.
Diversification is PeakBot’s golden rule and we believe a diverse portfolio is extremely important for algorithmic investing. A well-balanced portfolio reduces the impact of unsystematic events that cause additional risk.
One risk that PeakBot actively tries to avoid is slippage. This is the difference between the expected price and the actual price at which the trade is executed. Slippage is most prevalent during periods of higher volatility, which is an essential indicator within many of PeakBot’s proprietary algorithms.
To avoid mass slippage and encourage diversification PeakBot has capital allocation limits dependent on the tier of the users subscription. This simply means that PeakBot will limit the amount of dollars you can budget towards a certain position, or stock.
For example, our fast-paced bot, High Point has a capital allocation limit of $500 per stock. If you are a tier 1 user you will be able to budget as much as $500 on as many stocks as you choose, and remember the golden rule, diversify.