Developing trading ideas
The process of algorithmic trading always starts with a trading idea and ends with the paper or live-trading activity; it is composed of the five main steps that you can see in Figure 3.1:
Figure 3.1 - Developing trading ideas
Looking at Figure 3.1, you can see how the process of transforming a trading idea into a trading algorithm works. Please keep this in mind while reading this book. Let’s go through each step in detail:
- Trading idea generation: This is the initial phase, where you come up with a trading strategy or idea. It could be based on technical analysis, fundamental analysis, quantitative analysis, machine learning, or a combination of these approaches.
- Visualization: This step requires you to visualize the trading idea by creating all the necessary indicators and applying them to the financial instrument’s price chart.
- Strategy formulation: This step requires you to define the conditions...
