Summary
In this chapter, we delved into a very important market pattern: trend pullback. Initially, we learned the rationale behind such market behavior and split it into three components: a trend, a pullback, and an impulse. After that, we wrote several algorithms to identify the different components and assemble them in various ways, akin to playing with bricks. Then, we conducted a multiple-sensitivity analysis to check strategy robustness.
As you may have noticed thus far, we focused solely on entry logic, leaving exits to only some holding periods. As you will better understand in the next chapter, dedicated to risk management, the choice of building algorithms that separate entries from exits is not arbitrary but, rather, has a valid reason behind it.
