Summary
In this chapter, we defined the market rationale behind a trend, the role of information, and the market phases theory. We then went through two different approaches to algorithmically catch a trend, one based on moving averages and the other on higher highs. We then back-tested five different strategies and compared results across four different key performance metrics. Then, we discussed two ways to filter market noise: we wrote relative scripts and back-tested different filters. The main purpose of this chapter was to explore the process of transforming trading ideas into algorithms. In the next chapter, we are going to delve more into back-testing and optimization processes.
